Raj Ratan Palace Co-op Hsg Soc vs. DCIT (ITAT Mumbai)

DATE: (Date of pronouncement)
DATE: April 26, 2011 (Date of publication)

Click here to download the judgement (raj_ratan_society_redevelop.pdf)

Granting permission for development not “transfer” & consideration not assessable in society’s hands

The assessee, a co-operative housing society, was the owner of a plot of land on which a building was constructed. The assessee entered into a development agreement pursuant to which it gave the developer the right to demolish the structure and construct a new building. In consideration, the developer paid Rs. 2.51 Lakhs to the assessee and Rs. 3.02 crores to the individual members of the society. The AO held that as the assessee was the owner, it was entitled to the entire consideration of Rs. 3.02 crores (though paid to the members) and was assessable u/s 2(24). This was confirmed by the CIT(A) on the ground that the grant of development rights was a “transfer” and the consideration was assessable as “capital gains”. On appeal by the assessee, HELD allowing the appeal:

The assessee-society had merely given permission to the developer to construct on the society’s land. No part of the land was ever transferred by the society. The Society continued to be the owner of the land and no change in ownership of land had taken place. Mere grant of consent will not amount to transfer of land/or any rights therein. The amount of Rs. 3.02 crores received by the members (on which some of them had paid tax) was not assessable in the assessee’s hands either u/s 2(24) or as capital gains

See also Lotia Court 118 TTJ 199 (Mum), New Shailaja CHS (ITAT Mum), Om Shanti (ITAT Mum), Jethalal Mehta 2 SOT 422 & Taxation of Real Estate Transactions: A Treatise

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