As TDR has no cost of acquisition, amount received not taxable

ITO vs. Hemandas J. Pariyani (ITAT Mumbai)

The assessee was a member of Rajratan Palace Co-op Hsg Society. The Society entered into an agreement with a developer for redevelopment of the building owned by the Society pursuant to which the Society and its Members received Rs. 3.02 crores “on account of sale of FSI” from the developer. While Rs. 2.99 crores was received directly by the 51 members of the society, the Society received Rs. 2.51 lakhs. The AO took the view that the entire consideration of Rs. 3.02 crores was taxable in the hands of the Society {this was struck down in Raj Ratan Palace Co-op Hsg Soc vs. DCIT (ITAT Mumbai)}. A protective assessment was made in the hands of the Members on the ground that the “share of the assessee in the total FSI available to the CHS was a capital asset held by the assessee and that this was transferred to the developer“. This was reversed by the CIT (A). On appeal by the department, HELD dismissing the appeal:

Transferable Development Rights (TDR) granted by the Development Control Regulations for Greater Mumbai, 1991, qualifying for equivalent Floor Space Index (FSI) have no cost of acquisition and so sale thereof does not give rise to taxable capital gains (Jethalal D. Mehta vs. DCIT 2 SOT 422 (Mum) followed).