Commissioner of Income Tax vs Kailash Jyoti No. 2 CHS Ltd. and Others

In these five appeals there are common questions involved although the questions have variations. The core issue is whether acquisition of TDR (additional FSI) would amount to capital gains in the case at hand. We would refer to the facts in Income Tax Appeal No. 1607 of 2013 in which revenue has proposed the following questions:

"6.1 Whether on the facts and in the circumstance and in law the Hon''ble ITAT was justified in holding that the assessee had incurred no cost on acquisition of TDR of additional FSI?

6.2 Whether on the facts and in the circumstance, and in law the Hon''ble ITAT was justified in holding that there was no liability to assessee under the head ''Capital Gains'' on transfer of TDR of FSI?

6.3 Whether on the facts and in the circumstance, and in law the Hon''ble ITAT was justified in holding that the assessee transferred TDR for equivalent FSI?"

The respondent assessee is a Co-operative Housing Society which entered into an agreement dated 1st November, 2004 with one M/s. Mohta Capital Services Pvt. Ltd. for raising additional four floors upto 8th floor from 4th floor which formed part of the society''s building. In terms of the agreement the developers agreed to pay a sum of Rs. 700/- per sq. ft. for the additional FSI/TDR consumed for construction from 4th floor to 8th floor. The society received a sum of 1,62,60,756/-. The undisputed facts are that in respect of the additional FSI which the appellant society received in 1991, the society did not have to pay any amount towards acquisition of those rights and no part of the original cost of land vested in the society could be attributed to the FSI that was available. The assessing officer completed the assessment on 22nd December, 2009 assessed to income of Rs. 1,62,63,428/-.

The assessee being aggrieved preferred an appeal to the Commissioner of Income Tax (Appeals) against the order of the Assessing Officer. The appeal was allowed. Being aggrieved the revenue preferred an appeal before the Tribunal and the Tribunal in its order dated 12.3.2010 concluded that the assessing officer''s action for bringing the income under head of capital gains was not wrong and it was in accordance with the provisions of section 242 of the Income Tax Act, 1961 and Transfer of Property Act. It is in these circumstances that the present question has been referred to us.

We find that the issue at hand, is already decided by this Court in the matter of the Commissioner of Income Tax v. Sambhaji Nagar Co-operative Housing Society Ltd. vide judgment dated 11th December, 2014 to which one of us (Shri S.C. Dharmadhikari, J.) was a party. In that case, the society had acquired the land in question which was owned by the Assessee society and as a result of transfer of development rights and execution of the documents in favour of purchaser therein, the society received a sum of Rs. 2,23,25,157 which was added by the Assessing Officer to the total income of the assessee to be chargeable to tax as income under the head "Long Term Capital Gains".

This Court observed that a similar attempt has been rejected in the case of Nalinikant Ambalal Mody v. S.A.L. Narayan Row, Commissioner of Income-tax ITR 428 SC 432 and the conclusion of the Apex Court in the said judgment was followed which provided that only that which was 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 there was no cost at all. In that case, as in the present case, the situation was that the FSI/TDR was generated by the plot itself. There was no cost of acquisition in any of the appeals before us. Accordingly, following the view taken in Sambhaji Nagar Co-operative Housing Society Ltd., we find that none of the questions proposed by the Appellant raise any substantial question of law. Accordingly, the appeals are dismissed. There will be no order as to costs.