INCOME TAX ACT, 1961

--Capital gains--Capital asset Transfer of --Assessee transferred transferable development rights (TDRs) in land and received certain consideration. They contended that the said amount was not offered for taxation, the assessee, in sum and substance, submitted that the said receipts is not taxable as it did not had any cost of acquisition, therefore, it was outside the purview of chargeability as per section 45 of the Act and provisions of section 55, cannot be invoked on such kind of transaction. The assessing officer came to the conclusion that the land is an asset and so are the rights attached to the land. The land was acquired by the assessee after paying a consideration and ownership of the land carries with it, bundle of rights attached to it and of which the right of development is an important one. Therefore, the benefit in the form of TDR arising out of the existing land is an immovable property, the transfer of which was liable to be taxed as income under the head 'Capital Gains'. The consideration received by the assessee and its members on transfer of its TDRs and entitlements to the developers is nothing but a transfer of a capital asset only. [Para 15] Held : The concept of TDRs originates from the regulation of 'Development Control Regulation of Greater Mumbai' i.e., 'DCR, 1991', wherein it was provided that the owner or a lessee of a plot, which was reserved for public purpose under the development plan of DCR, would be eligible for award of compensation by way of development right certificate of equivalent Floor Space Index (FSI). In other words, the Govt. decided to grant Transferable Development Rights to the land owners, who agreed to surrender their lands on FSI for public purposes. These TDRs can be transferred to other land owners or building for constructing of the building or additional floors. The plots on which those development rights could be used were termed as 'Receiving Plots' and on these plots in addition to whatever FSI were originally available to the owner or lessor of such plots, additional FSI can be allowed to the owner or lessor on using the transferable development rights contained in DRCs for the purpose of construction of the building. Thus, the TDR is available to the owner/lessee of the land which surrenders to the Govt. and, therefore, the acquisition of such TDRs are to detriment the land surrendered by the owner/lessee, and such TDRs can be utilised on any plot vacant or already developed or by erection of additional storeys subject to the FSI available in the DCR. The contentions and reasoning of the assessing officer to the extent that the word 'Property' not only includes tangible asset but also intangible asset and, therefore, additional FSI available to the assessee in view of DCR, 1991, was a right acquired by virtue of being owner of the plot is correct. Thus, such a right is definitely a 'Capital Asset' held by the assessee and assignment of such a right in favour of the developer amounts to transfer of capital asset. In our conclusion, transfer of TDRs amounts to transfer of a 'Capital Asset'.