ARLETTE RODRIGUES, MUMBAI v. ITO WD 15(2)(2), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: MUMBAI BEFORE SHRI P.M. JAGTAP ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR JUDICIAL MEMBER ITA NO.343/MUM/2010 (ASSESSMENT YEAR: 2006-07) MRS. ARLETTE RODRIGUES FLAT NO.101 1ST FLOOR SHADAAB TOWERS SHERLY RAJAN ROAD BANDRA (WEST) MUMBAI 400 050 ASSESSEE VS ITO WARD 15(2)(2) MATRU MANDIR TARDEO MUMBAI REVENUE PAN: AFWPR 4091 M ASSESSEE BY: SHRI H.S. RAHEJA REVENUE BY: SHRI HARI GOVIND SINGH O R D E R PER R.S. PADVEKAR JM THIS APPEAL IS FILED BY THE ASSESSEE CHALLENGING TH E IMPUGNED ORDER OF THE LD. CIT (A) XXIV MUMBAI DATED 10.12.2009 F OR THE A.Y. 2006-07. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE COMMISSIONER OF INCOME-TAX (APPEALS) WAS NOT JU STIFIED IN ITA 343/M/2010 MRS. ARLETTE RODRIGUES 2 CONFIRMING THE ORDER OF THE ASSESSING OFFICER IN AP PLYING THE PROVISIONS OF SECTION 50C IN RESPECT OF ASSIGNMENT OF DEVELOPMENT RIGHTS. 2. THE APPELLANT SUBMITS THAT THE PROVISIONS OF SEC TION 50C APPLY ONLY IN A CASE OF A TRANSFER OF A CAPITAL ASS ET BEING LAND OR BUILDING OR BOTH AND THE SAME IS NOT APPLICABLE TO DEVELOPMENT RIGHTS AND HENCE THE PROVISIONS OF SEC TION 50C ARE NOT ATTRACTED. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE COMMISSIONER OF INCOME-TAX (APPEALS) WAS NOT JU STIFIED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER IN AD OPTING THE MARKET VALUE AS PER THE STAMP DUTY AUTHORITIES IS B AD IN LAW AND OUGHT TO BE QUASHED. 4. WITHOUT PREJUDICE THE APPELLANT SUBMITS THAT TH E CIT (APPEALS) AND THE ASSESSING OFFICER HAVE GROSSLY ER RED IN NOT GRANTING CREDIT FOR THE FSI OF THE FLATS RECEIVED B ACK BY THE APPELLANT AND THAT THE ENTIRE WORKING IS INCORRECT AND FAULTY AND THAT THE SAME OUGHT TO HAVE BEEN TAKEN AS A PAR T OF THE SALE CONSIDERATION AS WELL. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS NOT JU STIFIED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER IN AD OPTING THE SALE CONSIDERATION OF THE APPELLANT SHARE IN THE PR OPERTY AT RS 99 57 750/- BASED ON THE MARKET VALUE AS DETERMINED BY THE STAMP DUTY AUTHORITIES FOR THE PURPOSE OF REGISTRAT ION AND STAMP DUTY. ITA 343/M/2010 MRS. ARLETTE RODRIGUES 3 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE COMMISSIONER OF INCOME-TAX (APPEALS) WAS NOT JU STIFIED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER IN NO T ALLOWING A DEDUCTION OF THE FAIR MARKET VALUE OF THE FLAT ALLO TTED TO THE APPELLANT AS A REINVESTMENT U/S. 54 OF THE INCOME-T AX ACT. THE APPELLANT SUBMITS THAT THE SALE CONSIDERATION I N CASH AND IN KIND OUGHT TO HAVE BEEN CONSIDERED FOR THE PURPO SE OF CALCULATING THE TAXABLE CAPITAL GAIN I THEN HAND SO THE APPELLANT. 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE COMMISSIONER OF INCOME-TAX (APPEALS) WAS NOT JU STIFIED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER AND I N NOT REFERRING THE VALUATION TO THE DVO THE APPELLANT S UBMITS THAT THE SAID VALUE AS PER THE STAMP DUTY AUTHORITIES IS UNREALISTIC AND EXTREMELY HIGH AND THE ASSESSING OFFICER OUGHT TO HAVE REFERRED THE MATTER TO THE DVO AS PROVIDED U/S.50C OF THE ACT. THE APPELLANT OBJECTS TO THE SALE CONSIDERATION SO ADOPTED AND PRAYS THAT THE ASSESSING OFFICER BE DIRECTED TO OBT AIN THE REALISTIC VALUE OF THE PROPERTY FROM THE VALUATION DEPARTMENT OF THE INCOME-TAX DEPARTMENT. 2. THE ASSESSEE HAD FILED AN APPLICATION WITH A PRA YER TO ADMIT THE FOLLOWING ADDITIONAL GROUND:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE ASSESSING OFFICER WAS NOT JUSTIFIED IN ASSESSING AS CAPITAL GAIN THE FAIR MARKET VALUE AS PER THE STAMP DUTY / REGISTRAT ION AUTHORITIES IN RESPECT OF THE DEVELOPMENT RIGHTS GRANTED BY THE AP PELLANT AS THERE IS NO COST ATTRIBUTABLE TO THE SAME U/S. 55(2) OF T HE INCOME-TAX ACT. ITA 343/M/2010 MRS. ARLETTE RODRIGUES 4 3. ON THE ADMISSION OF THE ADDITIONAL GROUND WE HA VE HEARD THE PARTIES. THE LD. COUNSEL SUBMITTED THAT THE ADDITI ONAL GROUND IS A PURELY LEGAL GROUND ARISING OUT OF THE INTERPRETATI ON OF SECTION 55(2) OF THE ACT. IT IS ARGUED THAT SAID GROUND IS VERY MU CH RELEVANT TO DECIDE ONE OF THE ISSUES ARISING FROM THIS APPEAL. IT IS PLEADED THAT NO FURTHER FACTS ARE REQUIRED TO BE PROBED AND THIS GROUND CAN BE ADJUDICATED ON THE BASIS OF THE FACTS AVAILABLE ON RECORD. HE ALS O RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF NATIONA L THERMAL POWER CO LTD. 229 ITR 383. WE HAVE ALSO HEARD THE LD. D.R. 4. ON THE PERUSAL OF THE ADDITIONAL GROUND IT IS S EEN THAT THE ADDITIONAL GROUND IS PURELY LEGAL GROUND AS ARGUED BY THE LD. COUNSEL AND IT IS IN THE NATURE OF ONE OF THE ALTERNATE PLE AS OF THE ASSESSEE. WE THEREFORE FOLLOWING THE RATIO IN THE CASE OF THE N ATIONAL THERMAL POWER CO. LTD. (SUPRA) ADMIT THE ADDITIONAL GROUND TAKEN BY THE ASSESSEE. 5. FACTS WHICH REVEALED FROM THE RECORD ARE AS UND ER. THE ASSESSEE AND HER SONS TOGETHER HAVING ONE-HALF (50%) SHARE I N THE PROPERTY WHICH IS KNOWN AS LILY RODRIGUES HOUSE AT WARODA ROAD BANDRA (WEST) MUMBAI -50. THE ASSESSEE INHERITED THE SAID PROPER TY FROM HER LATE HUSBAND MR. DANNISON RODRIGUES ON HIS DEATH ON 14. 7.1997. THE ASSESSEE ALONG WITH HER SON AND SISTER-IN-LAW HAS E NTERED INTO A DEVELOPMENT AGREEMENT OF THE SAID PROPERTY WITH M/S . CALVIN CONSTRUCTION COMPANY (IN SHORT THE DEVELOPER) ON 31 .12.2005. IT IS CLAIMED BY THE ASSESSEE THAT THE DEVELOPMENT RIGHTS WERE TRANSFERRED TO THE DEVELOPER TO THE EXTENT OF 4171.48 SQ.FT. OUT O F THE TOTAL AREA OF 9931.48 SQ.FT. (932 SQ. MTRS.). IT IS FURTHER CLAI MED THAT AS PER THE AGREEMENT WITH THE DEVELOPER THE CONSTRUCTION OF T HE FOUR FLATS HAVING THE TOTAL CARPET AREA OF 4800 SQ.FT. WAS GIVEN ON C ONTRACT AND THE ASSESSEE AND OTHER CO-OWNERS AGREED TO PAY A CONSTR UCTION COST OF RS 35 LAKHS TO THE DEVELOPER. IN RESPECT OF THE DEVELOPM ENT RIGHTS GIVEN TO THE ITA 343/M/2010 MRS. ARLETTE RODRIGUES 5 DEVELOPER TO THE EXTENT OF 4171.48 SQ.FT. AREA IN T ERMS OF FSI THE DEVELOPER PAID RS.1.5 CRORES. THE ASSESSEE THEREF ORE CLAIMED THAT THE CAPITAL GAIN SHOULD BE RESTRICTED TO THE CONSIDERAT ION PAID BY THE DEVELOPER TO THE EXTENT OF 4171.48 SQ.FT. THE ASSE SSEE ALSO FILED THE VALUATION REPORT FROM THE REGISTERED VALUER SHOWING THE FAIR MARKET VALUE OF THE SAID PROPERTY AS ON 1.4.1981 FOR DETER MINING INDEX COST OF ACQUISITION AT RS 44 19 686/-. IT IS PERTINENT TO NOTE HERE THAT AT THE TIME OF THE REGISTRATION OF THE DEVELOPMENT AGREEME NT WITH THE DEVELOPER THE ASSESSEE PAID THE STAMP DUTY OF RS 3 98 500/- ON THE FAIR MARKET VALUE OF THE SAID PROPERTY DETERMINED BY THE SUB-R EGISTRAR ANDHERI-I MUMBAI AT RS 3 98 31 000/- (PAGE 1 OF THE PAPER BO OK). THE A.O. THEREFORE INVOKED SECTION 50C OF THE INCOME TAX AC T AND ADOPTED THE VALUATION MADE BY THE REGISTRATION AUTHORITY AT RS 3 98 31 000/- FOR STAMP DUTY PURPOSE IN PLACE OF THE CONSIDERATION DE CLARED IN THE DEVELOPMENT AGREEMENT OF RS 1.5 CRORES AND ACCORDI NGLY TAKING ASSESSEES 25% SHARES IN THE SAID PROPERTY DETERMI NED THE CAPITAL GAIN AT RS 55 34 064/-. THE ASSESSEE CHALLENGED ACTION OF THE A.O. BEFORE THE LD. CIT (A) BY TAKING PLEA THAT: (I) THE PROVISIONS OF SECTION 50C ARE NOT APPLICABL E TO THE TRANSACTION OF THE ASSESSEE I.E. DEVELOPMENT AGREEMENT AS THERE WAS NO TRANSFER OF ANY LAND OR BUILDING OR BOTH. (II) THE VALUATION MADE BY THE REGISTRATION AUTHORI TY FOR THE PURPOSE OF STAMP DUTY PAYMENT WAS UNREALISTIC AND EXTREMELY HIGH AND A.O. OUGHT TO HAVE REFERRED THE MATTER TO THE DVO H AS PROVIDED U/S.50C. (III) TO THE EXTENT OF THE FLAT RECEIVED BY THE ADM EASURING 1200 SQ.FT. THE DEDUCTION OF THE MARKET VALUE OF THE SAID FLAT SHOULD HAVE BEEN ITA 343/M/2010 MRS. ARLETTE RODRIGUES 6 ALLOWED IN ADDITION TO THE CONSIDERATION FOR THE A SSIGNMENT OF THE DEVELOPMENT RIGHTS. 6. THE ASSESSEE HAS FURTHER CONTENDED BEFORE THE LD . CIT (A) THAT THE ASSESSEE HAS DECLARED HER 25% SHARE IN SALE CONSIDE RATION OF RS 37 50 000/- AND AFTER CLAIMING THE INDEX COST OF RS 29 82 000/- AND FURTHER COST OF CONSTRUCTION OF NEW FLAT AT RS 8 7 5 000/- DECLARED NIL CAPITAL GAIN AND WHEREAS THE LD. A.O. HAS APPLIED PROVISION OF SEC. 50C OF THE ACT FOR TAKING CONSIDERATION OF THE SAID PRO PERTY WHICH IS NOT CORRECT. THE ASSESSEE ALSO CONTENDED THAT THE ASSE SSEE HAS TRANSFERRED THE DEVELOPMENT RIGHTS TO THE EXTENT OF 4 171.48 SQ .FT. IN FAVOUR OF THE DEVELOPER AND THERE IS NO SALE OF LAND OR BUILDING. IT WAS FURTHER CONTENDED THAT THE BALANCE FSI OF 5 760 SQ.FT. (CAR PET AREA 4800 SQ FTS.) WAS RETAINED BY THE ASSESSEE & CO-OWNERS OF THE SAI D PROPERTY AND THE SAME WAS TO BE UTILIZED FOR CONSTRUCTION OF THE FOU R FLATS FOR THEM AND COST OF CONSTRUCTION OF THE SAID FOUR FLATS WAS DET ERMINED AT RS 35 LAKHS AND SAME WAS PAID TO THE DEVELOPER. THE ASSESSEE H AVING 25% SHARE IN THE SAID PROPERTY AND HENCE SHE COULD GET ONLY ONE FLAT AND PAID THE COST OF CONSTRUCTION FOR THE SAID FLAT AT RS 8 75 000/-. THE ASSESSEE ALSO CONTENDED THAT AS ONLY RIGHT FOR DEVELOPMENT OF 417 1.48 SQ.FT. WAS ACTUALLY TRANSFERRED TO THE DEVELOPER HENCE THE PR OPORTIONATE VALUE OF THE SAID RIGHT IS TO BE TAKEN AT RS. 1 62 30 057/- AS PER THE VALUATION ADOPTED BY THE REGISTRATION AUTHORITY AND ASSESSEE S SHARE AT 25% TO BE TAKEN AT RS 41 81 514/-. ALTERNATIVELY IT WAS PL EADED THAT THE A.O. SHOULD HAVE MADE THE REFERENCE TO THE DISTRICT VALU ATION OFFICER (D.V.O.) AS PROVIDED IN SECTION 50C(2) OF THE ACT. THE ASSE SSEE ALSO DEMONSTRATED WHAT WAS THE FAIR MARKET VALUE OF THE SAID PROPERTY AS PER READY RECKONER USED BY THE REGISTRATION AUTHORITIES FOR DETERMINING STAMP DUTY PAYABLE ON THE CONVEYANCE AND CONSIDERING THE AREA OF 4141.48 SQ.FT. TRANSFERRED TO THE DEVELOPER ONLY TO THAT E XTENT IF AT ALL THE VALUATION U/S.50C IS TO BE RESTRICTED. ITA 343/M/2010 MRS. ARLETTE RODRIGUES 7 7. THE LD. CIT (A) REJECTED THE CONTENTION OF THE A SSESSEE THAT THE ASSESSEE HAS ONLY TRANSFERRED THE AREA TO THE EXTEN T OF 4141.48 SQ.FT. IN TERMS OF THE FSI. THE LD. CIT (A) FURTHER HELD THA T AS PER THE REGISTERED DOCUMENTS DATED 10.1.2006 I.E. DEVELOPMENT AGREEMEN T THE VALUE OF PROPERTY UNDER REFERENCE HAS BEEN DETERMINED AT RS 3 98 31 000/- THAT WAS IN RESPECT OF ENTIRE PROPERTY. THE LD. CIT (A ) FURTHER HELD THAT IT IS NOT BINDING ON THE A.O. TO MAKE A REFERENCE TO THE DVO AND MOREOVER THE ASSESSEE HERSELF HAS ACCEPTED THE VALUATION MAD E FOR THE STAMP DUTY PURPOSE. ACCORDINGLY LD. CIT (A) ALSO REJECTED TH E CONTENTION OF THE ASSESSEE THAT THE A.O. SHOULD HAVE REFERRED THE MAT TER TO THE DVO FOR THE VALUATION. IN RESPECT OF THE CONTENTION OF THE ASS ESSEE FOR GETTING FOUR FLATS CONSTRUCTED BY THE DEVELOPER THE LD. CIT (A) HELD THAT IT WAS ONLY IN NATURE OF ADJUSTMENT OF THE TRANSACTION. THE LD. C IT (A) ALSO REJECTED THE CONTENTION OF THE ASSESSEE THAT THERE WAS NO SALE A ND THE TRANSACTION BETWEEN THE OWNERS AND DEVELOPER WAS ONLY IN NATUR E OF TRANSFER OF THE DEVELOPMENT RIGHT AND HENCE PROVISIONS OF SECTION 5 0C ARE NOT APPLICABLE. THE LD. CIT (A) WAS OF THE OPINION THA T OUT OF THE TOTAL AREA THE OWNERS OF THE PROPERTY HAVE TO RETAIN 4800 SQ.F T. CARPET AREA WHICH WOULD BE UTILIZED FOR THE CONSTRUCTION OF THE FOUR FLATS (THE ASSESSEE WAS ENTITLED FOR ONE FLAT) AND THERE WAS NO REASON TO B IFURCATE THE SAID PROPERTY INTO TWO PARTS. 8. THE LD. CIT (A) FURTHER REJECTED PLEA OF THE ASS ESSEE THAT THE DEVELOPER WAS ALLOWED TO CONSUME ONLY 4171.48 SQ.FT S FSI IN SAID PROPERTY AND 5 760 SQ.FT. WAS UTILIZED BY THE ASSES SEE AND OTHER TWO OWNERS AND HENCE TO THAT EXTENT THERE WAS NO TRANSF ER. THE LD. CIT (A) FURTHER HELD THAT THE ENTIRE VALUE OF THE PROPERTY WHICH WAS THE SUBJECT MATTER OF THE TRANSFER OF THE DEVELOPMENT RIGHTS HA S TO BE CONSIDERED. IN RESPECT OF THE PLEA FOR ALLOWING DEDUCTION/EXEMPTIO N TO THE EXTENT OF RS 8 50 000/- U/S.54 FOR MAKING THE INVESTMENT OF THE LONG-TERM-CAPITAL- GAIN THAT WAS IN RESPECT OF THE COST OF THE FLAT PA ID BY THE ASSESSEE THE ITA 343/M/2010 MRS. ARLETTE RODRIGUES 8 LD. CIT (A) ALLOWED THE PLEA TO THAT EXTENT AND DIR ECTED THE A.O. TO REDUCE RS 8 50 000/- AND REST OF THE CAPITAL GAIN WAS DIR ECTED TO BE TREATED TOWARDS RELINQUISHMENT OF THE RIGHTS IN THE PROPERT Y TO THE DEVELOPER. NOW THE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER OF THE LD. CIT (A). 9. WE HAVE HEARD THE RIVAL SUBMISSION OF THE PROPER TIES AND PERUSED THE RECORDS. NOW WE SUMMARISE THE ARGUMENT OF THE L D. COUNSEL AS UNDER (I) THE FIRST LIMB OF ARGUMENT OF THE LD. COUNSEL IS THAT SECTION 50C OF THE ACT IS ONLY APPLICABLE WHEN THERE IS A TRAN SFER OF THE LAND OR BUILDING OR BOTH. REFERRING TO THE COPY OF THE DEV ELOPMENT AGREEMENT PLACED IN THE COMPILATION HE FURTHER ARG UES THAT AS PER THE TERMS OF THE DOCUMENT ONLY RESTRICTIVE RIGHT T O DEVELOP FSI TO THE EXTENT OF 4141 SQ.FT. IS GIVEN TO THE DEVELOPER AND EVEN THE POSSESSION OF THE PROPERTY WAS ALSO NOT GIVEN. IT IS ARGUED THAT THE APPLICABILITY OF SECTION 50C IN CASE WHERE ONLY RES TRICTIVE DEVELOPMENT RIGHTS ARE TRANSFERRED IS NOT CONTEMPLA TED. IT IS ARGUED THAT THE A.O. SHOULD HAVE REFERRED THE MATT ER TO THE DVO AS PER SECTION 50(2) AS THE VALUATION WAS EXORBITAN T AND UNREALISTIC. HE FURTHER SUBMITS THAT ON MANY OCCAS IONS FOR AVOIDING DELAY IN LITIGATION THE PARTIES SURRENDERE D TO THE REGISTRATION AUTHORITY AND ACCEPT THE VALUE DETERMI NED FOR THE PURPOSE OF PAYMENT OF THE STAMP DUTY AND THAT SHOUL D NOT BE SOLE BASIS FOR STRAIGHT WAY COMING TO THE CONCLUSION THA T THE ENTIRE PROPERTY WAS THE SUBJECT TO TRANSFER IN RESPECT OF THE DEVELOPMENT RIGHTS. (II) IN THE SECOND LIMB OF HIS ARGUMENT IT IS ARGUED THAT AT THE MOST THE WORKING OF THE CAPITAL GAIN SHOULD BE RESTRICTE D TO THE EXTENT OF 4171.48 SQ.FT AREA. IN RESPECT OF WHICH DEVELOPMENT RIGHTS WHICH ITA 343/M/2010 MRS. ARLETTE RODRIGUES 9 HAVE BEEN GIVEN TO THE DEVELOPER UNDER REGISTERED C ONVEYANCE AND ACCORDINGLY CAPITAL GAIN SHOULD HAVE BEEN WORKED OU T. (III) IN THE THIRD LIMB OF HIS ARGUMENT MORE PARTICULARLY ON THE ADDITIONAL GROUND IS THAT THE ASSESSEE HAS ONLY TR ANSFERED THE RESTRICTED RIGHTS TO THE DEVELOPER AND HENCE AS PE R SECTION 55(2) OF THE I.T. ACT THERE IS NO COST OF ACQUISITION OF TH E SAID RIGHT I.E. FSI AND NO CAPITAL-GAIN CAN BE WORKED OUT U/S.45 OF THE I.T. ACT. PER CONTRA. 10. WE HAVE ALSO HEARD THE LD. D.R. WHO SUPPORTED T HE ORDERS OF THE AUTHORITIES BELOW. 11. NOW LET WE GO ANSWERING THE CONTENTIONS RAISED BY THE ASSESSEE ONE-BY-ONE. THE ASSESSEE INHERITED SAID PROPERTY FR OM HER HUSBAND WHO EXPIRED ON 14.7.1997. THE ASSESSEE HAS 25% SHARE I N THE SAID PROPERTY AND HER SON MR. BRUCE RODRIGUES IS HAVING 25% OWNER SHIP AND REMAINING 50% IS WITH SMT. MYRTLE RODRIGUES WHO IS A SISTER OF ASSESSEES HUSBAND. THE SAID PROPERTY CONSIST OF G ROUND AND UPPER FLOORS HAVING TOTAL THREE FLATS. THE GROUND AND UP PER FLOORS WERE OCCUPIED BY THE TENANTS. THE ASSESSEE AND OTHER CO -OWNERS OF THE PROPERTY DECIDED TO DEVELOP THE SAID PROPERTY AND A CCORDINGLY ENTERED INTO DEVELOPMENT AGREEMENT DATED 31.12.2005 WITH THE DEVELOPER NAMELY M/S. CALVIN CONSTRUCTION CO. THERE SHOULD N OT BE QUARREL ON THE WELL SETTLED LEGAL PROPOSITION THAT THE RIGHTS OF THE PARTIES ARE GOVERNED BY TERMS OF THEIR CONTRACT SAVE WHICH AR E REGULATED BY THE STATUTORY PROVISION. HENCE IT IS NECESSARY TO EXA MINE THE TERMS AND CONDITIONS ON WHICH THE ASSESSEE AGREED TO GIVE THE SAID PROPERTY FOR THE DEVELOPMENT. THE ASSESSEE HAS FILED THE COPY OF TH E DEVELOPMENT AGREEMENT IN THE COMPILATION AT PAGE NOS. 4 TO 37 O F THE PAPER-BOOK. AS ITA 343/M/2010 MRS. ARLETTE RODRIGUES 10 PER THE RECITALS CLAUSE (F) THE ASSESSEE AND OTHE R OWNERS HAVE AGREED TO GRANT DEVELOPMENT RIGHTS TO THE DEVELOPER ON FOLLOW ING TERMS:- F) THE OWNER HAVE AGREED TO GRANT DEVELOPMENT RIGH TS TO THE DEVELOPERS HEREIN IN RESPECT OF SAID PROPERTY SUBJ ECT TO THEIR RESERVING AND RETAINING FOR THEMSELVES AN AREA OF 4800 SQ. FEET C ARPET AREA FOR THEIR RESIDENCE (WHICH WILL BE UTILIZED IN THE CONSTRUCTI ON OF 4 FLATS OF 1200 SQ. FEET CARPET AREA EACH ON THE 2ND / 3RD / 4TH & 5TH FLOORS OF THE NEW BUILDING TO BE CONSTRUCTED ON THE SAID PROPERTY AS HEREINAFTER SET OUT) AND FOR THE CONSIDERATION AND ON THE TERMS AND CONDITIO NS HEREINAFTER APPEARING. 12. THE CLAUSE (3) OF THE AGREEMENT IS ALSO RELEVAN T WHICH READS AS UNDER:- 3. ACCORDINGLY THE DEVELOPERS SHALL BE ENTITLED T O DEVELOP THE SAID PROPERTY AT THEIR OWN COSTS TO THE MAXIMUM EXT ENT PERMISSIBLE AND THE DEVELOPMENT CONTROL REGULATIONS OF THE MUNI CIPAL CORPORATION OF GREATER MUMBAI AT PRESENT IN FORCE O R AS MAY HEREAFTER BE IN FORCE FROM TIME TO TIME (WHICH WILL INCLUDE THE FSI RETAINED BY THE OWNERS AS AFORESAID). THE DEVELOPM ENT SHALL AS PART OF THE PROPOSED NEW BUILDING CONSTRUCT FOR AN D AS CONTRACTOR OF THE OWNERS THE SAID 4 FLATS OF 1200 SQ. FEET CARPET AREA EACH (FROM THE SAID FSI OF 4800 SQ. FEET CARPET AREA RETAINED BY THE OWNERS) AT OR FOR LUMP SUM CONSTRUCTION COST OF RS 35 00 000 /- (RUPEES THIRTY FIVE LAKHS ONLY ) (CALCULATED AT APPROXIMATELY RS 7 847=50 PER SQ. MTR FOR CARPET AREA). THE AGREED LUMP SUM CONSTRUCTION COST IS ALL INCLUSIVE AND IS NOT SUBJECT TO ANY UPWARD OR DOWNW ARD REVISION UNDER ANY CIRCUMSTANCES WHATEVER. THE SAID CONSTRU CTION COST SHALL BE ADJUSTED AGAINST AND DEDUCTED FROM THE CONSIDERA TION MONEY PAYABLE BY THE DEVELOPERS TO THE OWNERS IS PROVIDED IN CLAUSE 7.2 BELOW. A FLOOR PLAN IN RESPECT OF THE SAID FOUR FL ATS IS ANNEXED HERETO ITA 343/M/2010 MRS. ARLETTE RODRIGUES 11 AND MARKED ANNEXURE C . THE AMENITIES AGREED TO BE PROVIDED IN THE SAID FLATS OF THE OWNERS AND IN THE BUILDING AR E LISTED IN ANNEXURE D ANNEXED HERETO. 13. AS PER THE ABOVE TWO CLAUSES ONLY THE DEVELOPM ENT RIGHTS ARE TRANSFERRED IN FAVOUR OF THE DEVELOPER AFTER RETAIN ING THE CARPET AREA OF 4800 SQ.FT. AS TO THAT EXTENT NO RIGHTS ARE TRANSFE RRED IN FAVOUR OF THE DEVELOPER. AS PER CLAUSE (3) WHICH IS REPRODUCED HEREINABOVE THE ASSESSEE HAS UNDERSTANDING WITH THE DEVELOPER THAT THE DEVELOPER IN THE CAPACITY AS A CONTRACTOR SHOULD CONSTRUCT FOUR FL ATS IN THE SAID BUILDING FOR WHICH THE CONSTRUCTION COST OF RS 35 LAKHS HAS BEEN FIXED WHICH IS CALCULATED AT APPROXIMATELY RS 7 8407.50 PER SQ. MT R OF CARPET AREA. FROM THE ABOVE TWO CLAUSES IT IS SEEN THAT TO THE EXTENT OF 4 171 SQ.FT DEVELOPMENT RIGHT HAVE BEEN TRANSFERRED IN FAVOUR O F THE DEVELOPER. IT IS ALSO SEEN THAT THE TOTAL AREA OF THE PLOT IS 9 948 SQ.FT. BUT WHILE RETAINING AND RESERVING THE RIGHT CARPET AREA HAS BEEN CONSI DERED AS IT IS A COMPOSITE PROJECT PROBABLY AS MEASURE OF PRECAUTIO N THAT THE DEVELOPER SHOULD NOT TAKE THE ADVANTAGE OF UNWARRANTED LOADIN G OF SUPPER BUILD- UP AREA WHILE GIVING THE FLATS TO THE ASSESSEE AND OTHER CO-OWNERS. THOUGH IT IS A COMPOSITE PROJECT AT THE SAME TIME THE AREA TO BE ALLOTTED TO THE ASSESSEE AND OTHER CO-OWNERS HAVE BEEN CLEAR LY IDENTIFIED IN TERMS OF THE LOCATION AS WELL AS THE CARPET AREA. THE AS SESSEE HAS RETAINED 5760 SQ.FT. WHICH IS IN TERMS OF 4 800 SQ.FT. OF CA RPET AREA AND NO RIGHT IN THAT AREA IS TRANSFERRED TO THE DEVELOPER. 14. THE INTENTION OF THE PARTIES CAN BE WELL UNDE RSTOOD FROM THE TERMS AGREED BETWEEN THEM WHILE EXECUTING THE CONVE YANCE. WE THEREFORE FIND THERE IS FORCE IN THE ARGUMENT OF T HE LD. COUNSEL THAT TO THE EXTENT OF ONLY 4 171.48 SQ.FT. (387 SQ. MTRS.) THE DEVELOPMENT RIGHTS HAVE BEEN TRANSFERRED IN FAVOUR OF THE DEVELOPER H ENCE FOR THE PURPOSE OF ITA 343/M/2010 MRS. ARLETTE RODRIGUES 12 COMPUTING THE CAPITAL GAIN THE CONSIDERATION ATTRIB UTABLE THE AREA GIVEN TO THE DEVELOPER I.E. 4171.48 SQ.FT. ONLY IS TO BE CONSIDERED. 15. THE NEXT CONTENTION OF THE ASSESSEE IS THAT TH E PROVISIONS OF SECTION 50C OF THE ACT ARE NOT APPLICABLE TO THE DE VELOPMENT AGREEMENT AND HENCE VALUATION ADOPTED FOR THE PAYMENT OF THE STAMP DUTY CANNOT BE TREATED AS A CONSIDERATION FOR THE PURPOSE OF CO MPUTING THE CAPITAL GAIN. SECTION 50C READS AS UNDER:- 50C. (1) WHERE THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER BY AN ASSESSEE OF A CAPITAL ASSET BEI NG LAND OR BUILDING OR BOTH IS LESS THAN THE VALUE ADOPTED OR ASSESSED OR ASSESSABLE BY ANY AUTHORITY OF A STATE GOVERNMENT (HEREAFTER IN T HIS SECTION REFERRED TO AS THE STAMP VALUATION AUTHORITY) FO R THE PURPOSE OF PAYMENT OF STAMP DUTY IN RESPECT OF SUCH TRANSFER THE VALUE SO ADOPTED OR ASSESSED OR ASSESSABLE SHALL FOR THE PU RPOSES OF SECTION 48 BE DEEMED TO BE THE FULL VALUE OF THE CONSIDERA TION RECEIVED OR ACCRUING AS A RESULT OF SUCH TRANSFER. (2) WITHOUT PREJUDICE TO THE PROVISIONS OF SUB-SECT ION (1) WHERE (A) THE ASSESSEE CLAIMS BEFORE ANY ASSESSING OFFI CER THAT THE VALUE ADOPTED OR ASSESSED OR ASSESSABLE BY THE STAMP VALU ATION AUTHORITY UNDER SUB-SECTION (1) EXCEEDS THE FAIR MA RKET VALUE OF THE PROPERTY AS ON THE DATE OF TRANSFER; (B) THE VALUE SO ADOPTED OR ASSESSED OR ASSESSABL E BY THE STAMP VALUATION AUTHORITY UNDER SUB-SECTION (1) HAS NOT B EEN DISPUTED IN ANY APPEAL OR REVISION OR NO REFERENCE HAS BEEN MAD E BEFORE ANY OTHER AUTHORITY COURT OR THE HIGH COURT THE ASSESSING OFFICER MAY REFER THE VALUATION OF T HE CAPITAL ASSET TO A VALUATION OFFICER AND WHERE ANY SUCH REFERENCE IS MADE THE PROVISIONS OF SUB-SECTIONS (2) (3) (4) (5) AND ( 6) OF SECTION 16A CLAUSE (I) OF SUB-SECTION (1) AND SUB-SECTIONS (6) AND (7) OF SECTION ITA 343/M/2010 MRS. ARLETTE RODRIGUES 13 23A SUB-SECTION (5) OF SECTION 24 SECTION 34AA S ECTION 35 AND SECTION 37 OF THE WEALTH-TAX ACT 1957 (27 OF 1957) SHALL WITH NECESSARY MODIFICATIONS APPLY IN RELATION TO SUCH REFERENCE AS THEY APPLY IN RELATION TO A REFERENCE MADE BY THE ASSESS ING OFFICER UNDER SUB-SECTION (1) OF SECTION 16A OF THAT ACT. EXPLANATION 1.FOR THE PURPOSES OF THIS SECTION VALUATION OFFICER SHALL HAVE THE SAME MEANING AS IN CLAUSE (R) OF SEC TION 2 OF THE WEALTH-TAX ACT 1957 (27 OF 1957). EXPLANATION 2.FOR THE PURPOSES OF THIS SECTION TH E EXPRESSION ASSESSABLE MEANS THE PRICE WHICH THE STAMP VALUAT ION AUTHORITY WOULD HAVE NOTWITHSTANDING ANYTHING TO THE CONTRAR Y CONTAINED IN ANY OTHER LAW FOR THE TIME BEING IN FORCE ADOPTED OR ASSESSED IF IT WERE REFERRED TO SUCH AUTHORITY FOR THE PURPOSES OF THE PAYMENT OF STAMP DUTY. (3) SUBJECT TO THE PROVISIONS CONTAINED IN SUB-SECT ION (2) WHERE THE VALUE ASCERTAINED UNDER SUB-SECTION (2) EXCEEDS THE VALUE ADOPTED OR ASSESSED OR ASSESSABLE BY THE STAMP VALUATION AUTHORITY REFE RRED TO IN SUB-SECTION (1) THE VALUE SO ADOPTED OR ASSE SSED OR ASSESSABLE BY SUCH AUTHORITY SHALL BE TAKEN AS THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF T HE TRANSFER. 16. AS PER THE LANGUAGE USED IN THE SAID SECTION I T IS NOT NECESSARY THAT THE TRANSFER SHOULD BE IN THE NATURE OF THE S ALE OF LAND OR BUILDING OR BOTH AND IT IS ENOUGH THAT THERE IS A TRANSFER A S CONTEMPLATED U/S.2(47) OF THE ACT. SECTION 2(47) DEFINES THE TE RM TRANSFER AND WHICH READS AS UNDER:- TRANSFER IN RELATION TO A CAPITAL ASSET INCLU DES (I) THE SALE EXCHANGE OR RELINQUISHMENT OF THE A SSET ; OR (II) THE EXTINGUISHMENT OF ANY RIGHTS THEREIN ; OR ITA 343/M/2010 MRS. ARLETTE RODRIGUES 14 (III) THE COMPULSORY ACQUISITION THEREOF UNDER ANY LAW ; OR (IV) IN A CASE WHERE THE ASSET IS CONVERTED BY THE OWNER THEREOF INTO OR IS TREATED BY HIM AS STOCK-IN-TRADE OF A BUSINESS CARRIED ON BY HIM SUCH CONVERSION OR TREATMENT ;] [OR] [(IVA) THE MATURITY OR REDEMPTION OF A ZERO COUPON BOND; OR] [(V) ANY TRANSACTION INVOLVING THE ALLOWING OF T HE POSSESSION OF ANY IMMOVABLE PROPERTY TO BE TAKEN OR RETAINED IN PART PERFORMANCE OF A CONTRACT OF THE NATURE REFERRED TO IN SECTION 53A OF THE TRANSFER OF PROPERTY ACT 1882 (4 OF 1882) ; OR (VI) ANY TRANSACTION (WHETHER BY WAY OF BECOMING A MEMBER OF OR ACQUIRING SHARES IN A CO-OPERATIVE SOCIETY COMPAN Y OR OTHER ASSOCIATION OF PERSONS OR BY WAY OF ANY AGREEMENT O R ANY ARRANGEMENT OR IN ANY OTHER MANNER WHATSOEVER) WHIC H HAS THE EFFECT OF TRANSFERRING OR ENABLING THE ENJOYME NT OF ANY IMMOVABLE PROPERTY. EXPLANATION.FOR THE PURPOSES OF SUB-CLAUSES (V) AND (VI) IMMOVABLE PROPERTY SHALL HAVE THE SAME MEANING AS IN CLAUSE (D) OF SECTION 269UA. 17. THE DEFINITION OF THE TRANSFER GIVEN IN SECTION 2(47) IS A INCLUSIVE ONE. THE CONCEPT OF THE OWNERSHIP IS BASED ON THE BASIC JURISPRUDENCE THAT IT IS A BUNDLE OF RIGHTS LIKE RIGHT TO POSSESS USE AND ENJOY THE THING OWNED TO CONSUME DESTROY OR ALIENATE THE THING. M OREOVER THE OWNERSHIP HAS A CHARACTERISTICS OF INTER-DETERMINAT E IN DURATION AND ALSO OWNERSHIP HAS RESIDUARY CHARACTER. WHEN THE DEVELO PMENT RIGHTS WHICH ARE RESIDUARY ARE TRANSFERRED IT IS NOTHING BUT R IGHT TO EXPLOIT THE SAID PROPERTY IN FAVOUR OF THE DEVELOPER AND SAME IS COV ERED UNDER CLAUSE (I) TO SECTION 2(47) I.E. RELINQUISHMENT OF ASSET. WE ARE THEREFORE OF THE OPINION THAT THE PROVISIONS OF SECTION 50C ARE APPL ICABLE WHEN THE RIGHTS ITA 343/M/2010 MRS. ARLETTE RODRIGUES 15 TO DEVELOP THE PROPERTY ARE TRANSFERRED. WE THERE FORE REJECT THE CONTENTION OF THE ASSESSEE THAT THE PROVISIONS OF S ECTION 50C ARE NOT APPLICABLE 18. THE NEXT CONTENTION OF THE ASSESSEE IS THAT AS THERE IS NO COST OF ACQUISITION HAS CONTEMPLATED IN SUB-SECTION (2) TO SECTION 55 HENCE IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN TH E CASE OF CIT VS. B.C. SRINIVASA SETTY 128 ITR 294 (SC) NO CAPITAL GAIN C AN BE WORKED OUT U/S.45 OF THE ACT. THE CONTENTION OF THE ASSESSEE IS BASED ON THE FOOTING THAT DEVELOPMENT RIGHTS AS SUCH WAS NEVER ACQUIRED BY THE ASSESSEE OR THE EARLIER OWNER BUT WHAT ACQUIRED WAS FULL FLEDGE OWNERSHIP. RELEVANT SUB-SEC. (2) TO SEC.55 READS AS UNDER:- (2) [FOR THE PURPOSES OF SECTIONS 48 AND 49 COST OF ACQUISITION [(A) IN RELATION TO A CAPITAL ASSET BEING GOODWI LL OF A BUSINESS 62 [OR A TRADE MARK OR BRAND NAME ASSOCIATED WITH A BUSINESS ] 63 [OR A RIGHT TO MANUFACTURE PRODUCE OR PROCESS ANY ARTICL E OR THING] 64 [OR RIGHT TO CARRY ON ANY BUSINESS] TENANCY RIGHTS ST AGE CARRIAGE PERMITS OR LOOM HOURS (I) IN THE CASE OF ACQUISITION OF SUCH ASSET BY TH E ASSESSEE BY PURCHASE FROM A PREVIOUS OWNER MEANS THE AMOUNT OF THE PURCHASE PRICE ; AND (II) IN ANY OTHER CASE [NOT BEING A CASE FALLING U NDER SUB-CLAUSES (I) TO (IV) OF SUB-SECTION (1) OF SECTION 49 ] SHALL BE TAKEN TO BE NIL ; (AA) [IN A CASE WHERE BY VIRTUE OF HOLDING A CAP ITAL ASSET BEING A SHARE OR ANY OTHER SECURITY WITHIN THE MEANING OF CLAUSE (H) OF SECTION 2 OF THE SECURITIES CONTRACTS (REGULATION) ACT 1956 (42 OF 1956) (HEREAFTER IN THIS CLAUSE REFERRED TO AS THE FINANCIAL ASSET) THE ASSESSEE ITA 343/M/2010 MRS. ARLETTE RODRIGUES 16 (A) BECOMES ENTITLED TO SUBSCRIBE TO ANY ADDITIONA L FINANCIAL ASSET ; OR (B) IS ALLOTTED ANY ADDITIONAL FINANCIAL ASSET WIT HOUT ANY PAYMENT THEN SUBJECT TO THE PROVISIONS OF SUB-CLAUSES (I ) AND (II) OF CLAUSE (B)] (I) IN RELATION TO THE ORIGINAL FINANCIAL ASSET O N THE BASIS OF WHICH THE ASSESSEE BECOMES ENTITLED TO ANY ADDITIONAL FIN ANCIAL ASSET MEANS THE AMOUNT ACTUALLY PAID FOR ACQUIRING THE ORIGINAL FINANCIAL ASSET ; (II) IN RELATION TO ANY RIGHT TO RENOUNCE THE SAID ENTITLEMENT TO SUBSCRIBE TO THE FINANCIAL ASSET WHEN SUCH RIGHT I S RENOUNCED BY THE ASSESSEE IN FAVOUR OF ANY PERSON SHALL BE T AKEN TO BE NIL IN THE CASE OF SUCH ASSESSEE ; (III) IN RELATION TO THE FINANCIAL ASSET TO WHICH THE ASSESSEE HAS SUBSCRIBED ON THE BASIS OF THE SAID ENTITLEMENT ME ANS THE AMOUNT ACTUALLY PAID BY HIM FOR ACQUIRING SUCH ASSE T ; [(IIIA) IN RELATION TO THE FINANCIAL ASSET ALLOTTE D TO THE ASSESSEE WITHOUT ANY PAYMENT AND ON THE BASIS OF HOLDING OF ANY OTHER FINANCIAL ASSET SHALL BE TAKEN TO BE NIL IN THE CA SE OF SUCH ASSESSEE ;] AND (IV) IN RELATION TO ANY FINANCIAL ASSET PURCHASED BY ANY PERSON IN WHOSE FAVOUR THE RIGHT TO SUBSCRIBE TO SUCH ASSET H AS BEEN RENOUNCED MEANS THE AGGREGATE OF THE AMOUNT OF THE PURCHASE PRICE PAID BY HIM TO THE PERSON RENOUNCING SUCH RIG HT AND THE AMOUNT PAID BY HIM TO THE COMPANY OR INSTITUTION A S THE CASE MAY BE FOR ACQUIRING SUCH FINANCIAL ASSET ;] (AB) IN RELATION TO A CAPITAL ASSET BEING EQUITY SHARE OR SHARES ALLOTTED TO A SHAREHOLDER OF A RECOGNISED STOCK EXCHANGE IN INDIA UNDER A ITA 343/M/2010 MRS. ARLETTE RODRIGUES 17 SCHEME FOR [DEMUTUALISATION OR] CORPORATISATION APP ROVED BY THE SECURITIES AND EXCHANGE BOARD OF INDIA ESTABLISHED UNDER SECTION 3 OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT 1992 (15 OF 1992) SHALL BE THE COST OF ACQUISITION OF HIS ORIG INAL MEMBERSHIP OF THE EXCHANGE: PROVIDED THAT THE COST OF A CAPITAL ASSET BEING TRADING OR CLEARING RIGHTS OF THE RECOGNISED STOCK EXCHANGE ACQUIRED BY A SHAREHOLDER WHO HAS BEEN ALLOTTED EQUITY SHARE OR SHARES UNDER SUCH SCHEME OF DEMUTUALISATION OR CORPORATISATION SHALL BE DEE MED TO BE NIL;] (B) IN RELATION TO ANY OTHER CAPITAL ASSET ] (I) WHERE THE CAPITAL ASSET BECAME THE PROPERTY OF THE ASSESSEE BEFORE THE [1ST DAY OF APRIL [1981]] MEANS THE CO ST OF ACQUISITION OF THE ASSET TO THE ASSESSEE OR THE FAIR MARKET VALUE OF THE ASSET ON THE [1ST DAY OF APRIL [1981] ] AT THE OPTION OF THE ASSESSEE ; (II) WHERE THE CAPITAL ASSET BECAME THE PROPERTY O F THE ASSESSEE BY ANY OF THE MODES SPECIFIED IN [SUB-SECTION (1) OF] SECTION 49 AND THE CAPITAL ASSET BECAME THE PROPERTY OF THE PR EVIOUS OWNER BEFORE THE [1ST DAY OF APRIL [1981]] MEANS THE COST OF THE CAPITAL ASSET TO THE PREVIOUS OWNER OR THE FAIR MARKET VALUE OF THE ASSET ON THE [1ST DAY OF APRIL [1981]] AT THE OPTION OF THE ASSESSEE ; (III) WHERE THE CAPITAL ASSET BECAME THE PROPERTY OF THE ASSESSEE ON THE DISTRIBUTION OF THE CAPITAL ASSETS OF A COMPANY ON ITS LIQUIDATION AND THE ASSESSEE HAS BEEN ASSESSED TO I NCOME-TAX UNDER THE HEAD CAPITAL GAINS IN RESPECT OF THAT A SSET UNDER SECTION 46 MEANS THE FAIR MARKET VALUE OF THE ASSE T ON THE DATE OF DISTRIBUTION ; (IV) [***] ITA 343/M/2010 MRS. ARLETTE RODRIGUES 18 [(V)WHERE THE CAPITAL ASSET BEING A SHARE OR A STOCK OF A COMPANY BECAME THE PROPERTY OF THE ASSESSEE ON (A) THE CONSOLIDATION AND DIVISION OF ALL OR ANY O F THE SHARE CAPITAL OF THE COMPANY INTO SHARES OF LARGER AMOUNT THAN ITS EXISTING SHARES (B) THE CONVERSION OF ANY SHARES OF THE COMPANY IN TO STOCK (C) THE RE-CONVERSION OF ANY STOCK OF THE COMPANY INTO SHARES (D) THE SUB-DIVISION OF ANY OF THE SHARES OF THE C OMPANY INTO SHARES OF SMALLER AMOUNT OR (E) THE CONVERSION OF ONE KIND OF SHARES OF THE CO MPANY INTO ANOTHER KIND MEANS THE COST OF ACQUISITION OF THE ASSET CALCUL ATED WITH REFERENCE TO THE COST OF ACQUISITION OF THE SHARES OR STOCK FROM WHICH SUCH ASSET IS DERIVED 19. AS PER THE CLAUSE (A) TO SECTION 55(2 ) IN RESP ECT OF CERTAIN CAPITAL ASSETS THE MODE OF DETERMINATION OF COST OF ACQUIS ITION HAS BEEN SPECIFIED AND THE ASSESSEES CASE IS NOT COVERED IN CLAUSE (A). THE ASSESSEE HAS TRANSFERRED HER DEVELOPMENT RIGHTS TO THE DEVELOPER AND IN THAT PROCESS TRANSFER IS VERY IMPORTANT RIGHT IN OW NERSHIP I.E. COMMERCIAL EXPLOITATION OF THE PROPERTY AND IT CANNOT BE SAID THAT MERELY BECAUSE RIGHT TO DEVELOP OF THE PROPERTY IS TRANSFERRED IT IS ONLY INDEPENDENT RIGHT AND NOT ATTACHED TO OWNERSHIP OF THE PROPERTY AND H ENCE THERE IS NO COST OF ACQUISITION. IN OUR OPINION THE CONTENTIO N OF THE ASSESSEE IS NOT BASED ON ANY SOUND LEGAL JURISPRUDENCE. 20. THE ASSESSEE HAS ALSO RELIED ON THE PLETHORA OF THE DECISIONS IN SUPPORT OF THE CONTENTION THAT THE ASSESSEE HAS ONL Y ALLOWED THE BUILDER TO EXPLOIT THE FSI AND HENCE AS THERE IS NO COST OF ACQUISITION TO THE FSI HENCE NO CAPITAL GAIN IS BROUGHT TO TAX. ON THE PE RUSAL OF THE DECISIONS ITA 343/M/2010 MRS. ARLETTE RODRIGUES 19 RELIED ON BY THE LD. COUNSEL WE FIND THAT THOSE DE CISIONS ARE IN RESPECT OF THE EXPLOITING THE TDR I.E. TRANSFERABLE DEVELOP MENT RIGHT AND NOT EXPLOITING THE FSI AND HENCE AS THERE IS NO COST OF ACQUISITION OF AND AS THERE IS NO COST FOR THE ACQUISITION FOR THE FSI HE NCE THERE IS NO GAIN TO THE ASSESSEE AS CONTEMPLATED U/S.45 OF THE I.T. AC T. ON THE PERUSAL OF THE DECISIONS RELIED ON BY THE LD. COUNSEL WE FIND THAT THOSE DECISIONS ARE IN RESPECT OF THE EXPLOITING THE TDR I.E. TRANS FERABLE DEVELOPMENT RIGHT AND NOT EXPLOITING THE FSI. THE ASSESSEE HAS MAINLY RELIED ON THE DECISION OF THE ITAT MUMBAI IN THE CASE OF MATI PRA KASH CHS LTD. VS. ITO 24 SOT 366 (MUM) AND DEEPAK S. SHAH VS. ITO 29 SOT 26 (MUM). BOTH THE ABOVE DECISIONS ARE RENDERED IN THE CONTEX T OF ACQUIRING THE ADDITIONAL TRANSFERABLE DEVELOPMENT RIGHTS (TDR) AN D EXPLOITING THE ADDITIONAL FSI. SO FAR AS TDR ARE CONCERNED THE S AME IS GRANTED TO A PERSON WHEN THE LAND HAS BEEN ACQUIRED OR CERTAIN R ESERVATIONS ARE MADE ON THE LAND FOR THE GARDEN FOR ANY OTHER PUBLI C PURPOSE (UTILITY) HAVE BEEN AS PER THE DEVELOPMENT CONTROL REGULATION S 1991 (DCR). THE FSI OTHERWISE AVAILABLE ON THE LAND ACQUIRED OR RE SERVATION MADE ON THE SAID LAND FOR THE PUBLIC PURPOSE THE OWNER IS COMP ENSATED BY GIVING THE TDR AND TDR IS A TRANSFERABLE AND IT IS NOT REQUIRE D THAT THE OWNER HIMSELF SHOULD USE IT. IN FACT THE TDR IS IN THE NATURE OF THE FSI BUT IT HAS GOT A PECULIAR CHARACTER THAT FSI CANNOT BE TRA NSFERRED AND THE OWNER HAS TO USE THE FSI ON THE AVAILABLE LAND. BU T IN CASE OF A TDR EVEN IF A FSI IS EXHAUSTED BY THE OWNER OF THE LAND HE CAN BUY THE TDR IN THE MARKET AND TO THAT EXTENT HE CAN DO ADDITION AL CONSTRUCTION TREATING IT AS AN ADDITIONAL FSI. HENCE IN OUR OP INION TDR IS DIFFERENT THAN FSI PERMISSIBLE FOR AREA TO BE CONSTRUCTED ON THE LAND. AS PER THE DEVELOPMENT REGULATIONS THE FSI OF THE LAND CANNOT BE TRANSFERRED DETACHING SAME FROM A LAND SAVE PERMITTED TO DO SO AS DISCUSSED HEREIN ABOVE. IN THE LIGHT OF OUR DISCUSSION AND REASONS WE DISMISS ADDITIONAL GROUND TAKEN BY THE ASSESSEE. ITA 343/M/2010 MRS. ARLETTE RODRIGUES 20 21. THE NEXT CONTENTION OF THE ASSESSEE IS THAT THE A.O. SHOULD HAVE REFERRED THE MATTER TO THE VALUATION OFFICER U/S.50 C(2) OF THE ACT. 22. AS PER THE RECORD BEFORE US IT SEEN THAT THE A SSESSEE HAS FILED THE OBJECTION BEFORE THE A.O. IN RESPECT OF THE VALUATI ON ADOPTED FOR PAYMENT OF THE STAMP DUTY FOR REGISTRATION OF THE CONVEYANC E. WE ARE THEREFORE OF THE OPINION THAT THE A.O. SHOULD HAVE REFERRED T HE MATTER TO THE DVO AS PER THE PROVISIONS OF SECTION 50C(2) OF THE ACT AND CONTENTION OF THE ASSESSEE IS SUPPORTED BY THE DECISION OF THE CO-ORD INATE BENCH IN THE CASE OF MEGHRAJ BAID VS. ITO 114 TTJ 841 (JOD). WE THEREFORE RESTORE ISSUE OF VALUATION TO THE FILE OF THE A.O. WITH TH E DIRECTION THAT HE SHOULD REFER VALUATION MATTER TO THE DEPARTMENTAL VALUATIO N OFFICER (DVO) AS PER THE PROVISIONS OF SUB-SEC.(2) TO SEC. 50C OF THE AC T AND THEREAFTER RE- COMPUTE A CAPITAL GAIN AS PER THE FINDINGS AND DIR ECTIONS IN THIS ORDER. NEEDLESS TO SAY THE ASSESSEE SHOULD BE GIVEN OPPOR TUNITY OF BEING HEARD AS PER THE PRINCIPLES OF NATURAL JUSTICE. 23. IN THE RESULT ASSESSEES APPEAL IS PARTLY ALLO WED FOR THE STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 1 8TH FEBRUARY 2011. SD/- SD/- ( P.M. JAGTAP ) ACCOUNTANT MEMBER ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI DATE: 18TH FEBRUARY 2011 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) 26 MUMBAI. 4) THE CIT 15 MUMBAI. 5) THE D.R. A BENCH MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR *CHAVAN I.T.A.T. MUMBAI ITA 343/M/2010 MRS. ARLETTE RODRIGUES 21 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 01/02.02.2011 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 01/02.02.2011 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER