Capital gain-Ss. 45 and 48- A. Y. 2007-08- Gains on sale of TDR received as additional FSI as per the D. C. Regulations has no cost of acquisition and is not chargeable to capital gains tax

CIT vs. Sambhaji Nagar Coop. Hsg. Society Ltd (Bom); ITA No. 1356 of 2012 dated 11/12/2014: www.itatonline.org:

In this case, the Tribunal held that the gains on sale of TDR received as additional FSI as per D. C. Regulations has no cost of acquisition and accordingly is not chargeable to capital gains tax.

On appeal by the Revenue, the Bombay High Court upheld the decision of the Tribunal and held as under:

i) 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.

ii) It may be that subsection (2) of s. 55 clause (a) having been amended, there is a stipulation with regard to the tenancy rights. 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.

iii) Therefore, the Tribunal was in no error in concluding that the TDR which was generated by the plot/property/ land and came to be transferred under a document in favour of the purchaser would not result in the gains being assessed to capital gains.”