There are certain assets like intangible assets or any sort of right for which no consideration has been paid for the acquisition. The cost of acquisition of such assets is not clearly defined as ‘nil’ in the present provision. This has led to many legal disputes and the courts have held that for taxability under capital gains, there has to be a definite cost of acquisition or it should be deemed to be nil under the Act. Since there is no specific provision which states that the cost of such assets is nil, the changeability of capital gains from the transfer of such assets has not found favour with the Courts.

The intention of the Finance Bill, 2023 is to overcome the decision of The Hon’ble Supreme Court in the case of CIT v. B.C. Srinivasa Setty [1981] 128 ITR 294 (SC) wherein it was held that if the asset does not have any ascertainable cost, the computation mechanism fails and hence no capital gains can be computed.

The Hon’ble Bombay High Court in the case of Chheda Housing Development Corpn, a Partnership firm v. Bibijan Shaikh Farid & ors 2007 (3) MHLJ 402 (Bom) (HC) held that FSI/TDR being a benefit arising from the land, consequently must be held to be immovable property.

Now an issue arises whether TDR will be considered an immovable-intangible property and whether the decision of the Hon’ble Bombay High Court in the case of CIT v. Sambhaji Nagar Co-op. Hsg. Society Ltd. [2015] 370 ITR 325 (Bom)(HC) held that where the assessee had not incurred any cost to acquire TDR attached to the land owned by the society, transfer of same to the developer for consideration for construction of a floor space index would not be eligible to capital gains tax. Whether the ratio will hold well after the proposed amendment is a debatable issue.