In 1986, assessee’s immovable property was acquired by municipal corporation.  Assessee got a right in Transferable Development Right (TDR) in lieu of acquisition of his immovable property. No TDR was allotted for long .,On 17-8-1996, assessee entered into an MoU with third party for transfer of right in TDR though there was no TDR in hand Surplus derived from transfer of TDR rights had been assessed under head capital gains.  In 2004, said MoU was cancelled because purchaser was not willing to wait anymore because of delay in allotment of TDRs by competent authority. The assessee got a new buyer for right in TDR and, accordingly, one more MoU was entered into and right in TDR was transferred. The assessee invested the amount in capital gain bonds and claimed exemption u/s 54EC of the Act. The AO held that the transfer of right in the TDR is held to be short term capital gain and denied the exemption u/s. 54EC  of the Act. On appeal the CIT (A) held that gain on sale of TDR is speculative gain and assessed u/s 43(5) of the Act and denied the exemption u/s. 54EC of the Act. On appeal the    Tribunal held that as TDR was inextricably linked with immovable property and it flew from transfer of immovable property, TDR was a capital asset within meaning of S 2(14) of the Act. Accordingly the surplus from transfer of TDR would be capital gains; not speculative business profit. The  fact that assessee had derived right in TDR by virtue of acquisition of immovable property by municipal authorities in year 1986 and such right was conferred on assessee from date of acquisition of property, subsequent cancellation of sale of TDR to third party could not be considered as purchase of TDR from a third party and, therefore, for purpose of determination of period of holding, period of holding of asset from date of acquisition of property by municipal authorities had to be considered, and date, when MoU was cancelled in year 2004 was not to be considered. If investments were made in NABARD Capital Gain Bonds, exemption claimed by assessee under S. 54EC was to be allowed. (AY. 2005-06)