ARJUN D. CHHABRIA,MUMBAI vs. ACIT 19(3), MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा सद� राजे� के अनुसार PER RAJENDRA, AM- Challenging the order,dated 5/02/2013,of the CIT-(A) 30,Mumbai the assessee has filed present appeal raising various grounds.He is also filed an additional ground of appeal.Assessee is an individual and had filed his return of income on 17/09/2008, declaring total income at Rs.14.94 lakhs.The Assessing officer (AO)completed the assessment, under section 143 (3) of the Act,on 24/12/2010, determining the income of the assessee at Rs. 1.72 crores. Brief facts: 2.The Chhabria family owned plot of land in Doulat Nagar,Borivali.The father of the assessee, late Doulatram Mohan Das had divided the property into several plots of land and had constructed residential quarters and shops on the said plots.He had laid out internal roads between the plots and had sold some of the plots with or without the structures thereon. All the said internal roads lying between the said plots within Doulatnagar property(roads in serial numbers 174, 175, 176, 177 of Eksar taluka of Borivali) were acquired by the Municipal Corporation of greater Mumbai in 1954.Entire maintenance of the roads, including lightning of the road, was being carried out by the Corporation.Sometime in the year 2004,an agreement was executive between the assessee, along with his two brothers and M/s. Namah builders-who wanted to purchase potential TDR rights. An advance of Rs. 33 lakhs was given by the builder at that point of time.The agreement was further extended in April, 2006. The assessee along with his brothers received consideration of Rs.4.72 crores.The share of the assessee was Rs. 1.57 crores. 2.1.During the assessment proceedings,the AO held that the sale consideration, received by the assessee, had to be taxed under the head income from other sources, that there was no asset in existence which had been sold by the assessee, that what had been contemplated for trade was a right to TDR whereas in reality no such write existed, that internal roads were acquired by the Municipal Corporation even prior to the court degree,that the degree would have significance for all the land except the area of the roads.The AO referred to the terms of the agreement of assignment of right to TDR on the roads entered into by the assessee and his brothers with the builder and held that in the absence of the concrete right in existence it could not be said that an amount received for sale of an asset was attracting capital gains.

3242/M/13-Arjun Chabria 3.Aggreived by the order of the AO, the assessee preferred an appeal before the First Appellate Authority(FAA). Before him ,the assessee placed reliance on several decisions which held that right to TDR was a capital asset attracting capital gains.An affidavit was also filed to the effect that although the property was subjected to acquisition by the Municipal Corporation-it was ultimately not acquired,that no conveyance of the internal roads in favour of Municipal Corporation had ever been executed,that the property register card was in the name of the assessee. 3.1After considering the submission of the assessee and the assessment order,the FAA held that assessee had handed over possession of the roads,that the rights over the road were in active possession of Municipal Corporation right since 1954, that Corporation was looking after the maintenance of the roads including lightning,that onus of establishing the ownership was on assessee,that he had not discharged his onus,that what had been transferred was not TDR but only the right to receive TDR,that there was no real asset in existence,that what was transferred under the agreement was only a potential asset,that such an asset could not constitute a capital assets,that the AO had rightly that the receipt under the head income from other sources.

4.During the course of hearing before us,the Authorised Representative(AR)contended that during the assessment year under consideration the assessee had transferred the TDR rights in respect of the roads,that the assessee had purchased a residential house in Pune for a total consideration of Rs. 1.20 crores in order to claim relief under section 54F of the Act. He referred to the page number 54-56 of the paper book and stated that city survey office Borivali,Mumbai had issued the property card of the disputed land in name of the assessee and his brothers,that from the property card it was clear that assessee was the owner of the roads and that Municipal Corporation was in possession of the roads, that one of the brothers was assessed at Bangalore and the claim of TDR was accepted by the Department, that income arising out of sale of TDR was not taxable. He referred to the cases of land these co- operative housing society (55SOT103), Shambhji Nagar co-operative housing society Ltd.(370 ITR 325), Madhuban CHS (ITA/3257/ MUM/ 2011-AY .2006-07, dated 26/02/2014). The Departmental Representative (DR)stated that matter could be decided on merits.

5.We have heard the rival submissions and parents the material before us.We find that the AO and the FAA had held that assessee was not the owner of the roads for which TDR agreement was executed. In our opinion,the property-card,produced by the assessee,leaves no doubt that the assessee was owner of the roads though the possession of the road was with Bombay Municipal Corporation for maintenance purposes.Once it is accepted that assessee was the owner of the capital assets, it has to be agreed that sale of TDR with regard to said asset would not be taxable. Here,we would like to rely upon the case of Shambhaji Nagar CHS Ltd.(supra). The Hon’ble jurisdictional High Court has decided the issue of taxability of TDR rights as under: “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 AO 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 2

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