The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that the sale of FSI/ Transfer of Developmental Rights would not attract capital gain under the Income Tax Act, 1961.
During the relevant assessment year, the assessee has sold TDR/FSI development rights for Rs.2.50 crore which was claimed as exempt from income tax. The Assessing Officer held that the transfer of development rights clearly attracts the capital gain tax as it is a transfer of capital asset.
On appeal, the first appellate authority held in favour of the assessee. The department approached the Tribunal for relief.
The Tribunal noticed the decision of the Bombay High Court in the case of CIT vs. Sambhaji Nagar Co-op. Hsg. Society Ltd. (supra), and held that “the Bombay High Court has held that in case of sale of FSI/TDR rights by the assessee to the developers which have accrued in favour of the assessee following promulgation of Development Control Rules for Greater Mumbai, 1991and the said developmental right was generated by the plot itself and there is no cost of acquisition and therefore not liable for any capital gain tax. In the present case, the facts are similar to the facts in the case as discussed hereinabove wherein the Hon’ble Bombay High Court has held that no capital gain tax is attracted in the case of sale of FSI/TDR, we, therefore, respectfully following the same uphold the order of Ld. CIT(A) by dismissing the appeal of the Revenue.”
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