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Assessee by : Sh. Vipul Joshi -AR Revenue by : Sh. Suman Kumar (DR) Date of hearing : 12.04.2017 Date of order : 28.04.2017 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. These two appeals under section 253 of the Income Tax Act (the Act) by Assessee are directed against the order of Ld. Commissioner of Income Tax (Appeals)-31, for short CIT (A), Mumbai, and dated 06.05.2011 for assessment year 200-6-07. In both the appeals the facts are common and the grounds of appeal are connected thus both the appeal were heard and are ITA No- 5234/M/2011 ITA No- 5235/M/2011 decided by consolidated order to avoid the conflicting decisions. In the assessee has raised following grounds of appeal; (1) The grounds of appeal that follows are independent and without prejudice to each other. (2) Non-applicability of the provisions of section 50C of income tax Act. That on the fact and in the circumstances of the case and in law, the learned Commissioner (Appeals) erred in upholding that the provisions of section 50C could be invoked in respect of floor space index (FSI) transferred by the appellant. That on the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) failed to understand the true nature of agreement and has failed to appreciate the facts that the appellant had merely assigned its right to load FSI on the existing plot of land (on is a senior is basis) with a right to construct additional upper floors in the said premises by utilising the and utilised FSI. That the learned Commissioner (Appeals) failed to appreciate the facts that the assignment of the aforesaid right to load FSI did not constitute land or building, so as to come within the purview of section 50. C. That on the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) erred in non-adjudicating upon the additional ground raised by the appellant filed with the Commissioner (Appeals) under covering letter dated February 2, 2009 with regard to the determination of the fair market value of the aforesaid rights, as determined by District Valuation Officer. That on the facts and in the circumstances of the case and in law, learned Commissioner of income tax (Appeals) failed to appreciate the facts that the valuation arrived by the District Valuation Officer was very much on the higher side, having regard to the location condition of the property and the circumstances leading to the assignment of the aforesaid rights. Further vide application dated 11th March 2013 the assessee raised following additional grounds of appeal;
(3) The Assessing Officer erred in taxing the gain arising on transfer of unutilised FSI without considering the facts that such right have no cost of acquisition, and therefore, in the light of Supreme Court decision in CIT versus B.C. Srinivasa Setty [1981] 128 ITR 294(SC), the gain arising on transfer of these rights cannot be taxed. (4) Without prejudice to the above ground, if the contention of Commissioner of income tax (Appeals) is accepted that the appellant transferred land along with unutilised FSI attest to the land, it is submitted that CIT (Appeal)s erred in not allowing the indexed cost of acquisition/improvement of rent. In Appeal the assessee has raised following grounds of appeal; ITA No- 5234/M/2011 ITA No- 5235/M/2011
(1) Addition to long-term capital gain on the appellant’s 1/6th co-ownership share in respect of sale of rights to load floor space index(FSI) and property situated at Model Industrial Colony: (1.1) That on the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) erred in accepting the Assessing Officer’s contention that the Capital Gains arising in respect of appellant’s 1/6th co-ownership share in the property at Model Industrial Colony be taken at Rs.29,76,066/- vis-à-vis a sum of Rs. 15,03,333/-offered by the appellant in his return of income. (1.2) That the aforesaid addition on account of long-term capital gains made in the hands of the appellant is contingent upon the outcome of the appeal filed before the all built tribunal in case of model industrial Colony, an association of persons, which held the FSI rights 2. For appreciation of facts first we are referring the facts as culled out from appeal /M/2011. The brief facts of the case are that the assessee is a Association of Persons (AOP), filed its return of income for relevant assessment year on 30 June 2006 declaring total income of Rs. 92,53,444/-. In the return of income assessee besides the other income has shown the income from long-term capital gains on sale of FSI. The Assessing Officer noticed that assessee has shown Capital Gain of Rs.90,20,000/- on sale of FSI after deducting the legal and professional fees of Rs. 80,000/- against the sale consideration of Rs. 91,00,000/-. On further perusal of agreement to sell for sale of FSI the Assessing Officer noticed that market value of the said FSI as per the Stamp valuation is Rs.4,14,20,000/-. The Assessing Officer in the course of assessment proceeding referred the copy of said agreement to District valuation for determination of fair market value under section 50C of Income Tax Act. The District Valuation Officer sent its valuation report vide report dated 26.12.2008. According to DVO the value of said FSI was at Rs.1,79,54,400/-. Accordingly, the Assessing Officer after making the deduction of professional charges of Rs. 80,000/-worked out the long-term Capital Gain of AOP/assessee at Rs. 1,78,74,400/-. The Assessing Officer bifurcated the share in the AOP/assessee in the following manner; ITA No- 5234/M/2011 ITA No- 5235/M/2011 Dividend among co-owners u/s Share Long-term Capital 27 Gain in Rs. Nirja M. Patel 1/ 12 14,89,533/- Nikhil M.Patel 1 /12 14,89,533/- Rachana D. Patel 1/12 14,89,533/- Pranav D.Patel 1/12 14,89,533/- Savitaben H. Patel 1/3 59,58,133/- Neil P. Patel 1/6 29,79,067/- Sunny A. Patel 1/6 29,79,067/- Total 1,78,74,400/- On appeal before Commissioner (Appeals) the action of Assessing Officer was confirmed. Aggrieved, by the order of Commissioner (Appeals) the assessee has filed present appeal before us.
Now, we shall examine the facts of appeal ITA No.5234/M/2011. The assessee in the present appeal is one of the Member of AOP ( in ITA No5234). The assessee filed return of income for relevant assessment year on 28 July 2006 declaring income at Rs.15,08,260/-. The assessment was processed under section 143(1) on 13 February 2007. Subsequently, the case was reopened under section 147 for the reasons that in case of Model Industrial Colony, in which the assessee is one of the beneficiaries. The assessment of AOP/Model industrial Colony was completed by Assessing Officer who reopened the case of assessee. The Assessing Officer noticed that the assessee declared Capital Gain in respect of 1/6th on sale of property/(FSI) of Rs.15,03,333/- in AOP. However, the Long-term Capital Gains on sale of FSI, while framing assessment in case of AOP, chargeable at the hand of assessee is of Rs.29,79,067/-. Thus, the Assessing Officer has taken the Long-Term Capital Gain of Rs.29,79,066/- instead of Rs. 15,03,333/- while passing assessment order under section 143(3) rws 147 of the Act. On appeal before Commissioner (Appeals) the action of Assessing ITA No- 5234/M/2011 ITA No- 5235/M/2011
Officer was confirmed. Hence, further aggrieved by the order of Commissioner (Appeals) the assessee filed present appeal before us. 4. We have heard the learned AR of the assessee and the learned DR for the revenue and with their assistance perused the record of the cases. The learned AR of the assessee argued that assessee has raised an additional ground of appeal before this Tribunal challenging the very taxability of the Capital Gain on the transfer of FSI/TDR. The learned AR of the assessee further submitted that additional ground of appeal raised in both the appeals are purely legal in nature and the facts related to the additional grounds are available on record. In entertaining the additional grounds the Tribunal will not require to investigate into any fresh facts, which are not available on record. The learned AR of the assessee further relied upon the decision of Hon’ble jurisdictional High Court in case of CIT Versus Shambhaji Nagar co-operative Housing Society [2015] 370 ITR 325(Bombay) dated
11. December 2014. The learned AR of the assessee further argued that the ld CIT(A) was not having the benefit of decision of Hon’ble High Court at the time of considering the grounds of appeal of the assessee. It was prayed by learned AR that matter may be remanded back to the file of Assessing Officer/CIT(A) to consider the decision of Jurisdictional High Court on the issue involved in the present appeal and decide the issue afresh. On the other hand the learned DR for the revenue supported the orders of authorities below. The learned DR for the revenue argued that the additional grounds of appeal were raised after three years of filing the appeals before the Tribunal. However, the ld DR not disputed the decision of Hon’ble High Court. The ld DR has no objection if both the appeal are restore to the file of Assessing Officer as both the case are connected with each other.
ITA No- 5234/M/2011 ITA No- 5235/M/2011
We have considered the rival contention of the parties and gone through the orders of authorities below. The question for consideration raised in the additional ground in both the appeals is, as to whether the initial cost of acquisition of the asset (FSI/TDR) was capable of ascertainment or not for the purposes of computation of capital gains. Hon’ble jurisdictional High Court in CIT Versus Shambhaji Nagar co-operative Housing Society (supra), while considering the similar grounds has held as under; “ Only an asset which is capable of acquisition at a cost would be included within the provisions pertaining to the head “Capital gains” as opposed to assets in the acquisition of which no cost at all can be conceived. In the present case as well, the situation was that the FSI/TDR was generated by the plot itself. There was no cost of acquisition, which has been determined and on the basis of which the Assessing Officer could have proceeded to levy and assess the gains derived as capital gains. It may be that subsection (2) of section 55 clause (a) having been amended, there is a stipulation with regard to the tenancy rights. However, even in the case of tenancy right, the view taken by the Hon’ble Supreme Court, after the provision was substituted w.e.f. 1st April, 1995, is as above. The further argument is that the tenancy rights now can be brought within the tax net and in the present case the asset or the benefit is attached to the property. It is capable of being transferred. All this may be true but as the Hon’ble Supreme Court holds it must be capable of being acquired at a cost or that has to be ascertainable. In the present case, additional FSI/TDR is generated by change in the D. C. Rules. A specific insertion would therefore be necessary so as to ascertain its cost for computing the capital gains.
Considering, the decision of Hon’ble jurisdictional High Court and since the issue goes to the root of matter, we deem it appropriate to admit the additional ground and restore the case to the file of Assessing Officer to consider the case(s) afresh and pass the order afresh in accordance with law. Needless, to say that before passing the order the Assessing Officer shall provide sufficient opportunity of hearing to the assessee. The assessee is also directed to fully cooperate with Assessing Officer and to provide necessary information to the Assessing Officer. As we have restored the case to the file of Assessing Officer on the preliminary issue, hence, the discussion on other grounds of appeal is not being made and the ITA No- 5234/M/2011 ITA No- 5235/M/2011 same is also shall be re-examined by the AO as per law. With the above direction both the appeals of the assessee are allowed for statistical purpose. 6. In the result, both the appeals of the assessee’s are allowed for statistical purpose. Order announce in the open court on 28th day of April 2017.