Skip to main content

No capital gains on sale of FSI by housing societies, rules Bombay HC

A housing society does not have to pay any capital gains tax when it sells additional floor space index (FSI) to a builder, according to a recent Bombay high court decision.

Development Control Regulations (DCR), 1991, provide for grant of additional FSI if an existing building is redeveloped. The society can utilize it either for extension of the existing building, construction of a new building or even sell it to a builder.

When the additional FSI was sold to a builder, it typically resulted in an endless bout of tax litigation, which will be put to rest with the Bombay high court order. This favourable order will bring cheer to many old housing societies that have entered into redevelopment agreements or plan to do so.

Lower Parel's Sambhaji Nagar Coop Housing Society, owing to reconstruction of its old buildings, generated an additional FSI (as per DCR), which it sold to a builder for Rs 2.2 crore. Authorities sought to tax the sale proceeds as capital gains. The society won an appeal at the tax tribunal level.

The tax department, though, took the matter to the high court.

Capital gains is the difference between the sale proceeds minus the indexed cost of acquisition.

Hitesh R Shah, partner, SHR and Co, a firm of chartered accountants, explains the recent order. HC has taken into consideration the amendment in tax laws, which have brought tenancy rights in the ambit of capital gains. However, regarding a housing society's sale of additional FSI (received in the form of TDR) to the developer, HC held it was generated by the plot itself and there was no cost of acquisition. Thus, the question of computing capital gains for tax purposes didn't arise."

Experts hasten to point out that HC dealt with capital gains arising in the hands of a housing society on the sale of additional FSI or TDR where there was no cost of acquisition. The same order cannot be stretched to apply to members of a housing society who transfer their existing flats to the developer in lieu of a new one.

This transaction between members of the housing society and the developer could be regarded as a 'transfer' for the purpose of capital gains and could, depending on the facts of each individual case, result in capital gains.

 Article referred: http://timesofindia.indiatimes.com/city/mumbai/No-capital-gains-on-sale-of-FSI-by-housing-societies-rules-Bombay-HC/articleshow/45580062.cms

Comments

Post a Comment

Most viewed this month

Inherited property of childless hindu woman devolve onto heirs of her parents

In Tarabai Dagdu Nitanware vs Narayan Keru Nitanware, quashing an order passed by a joint civil judge junior division, Pune, the Bombay High Court has held that under Section 15 of the Hindu Succession Act, any property inherited by a female Hindu from her father or mother, will devolve upon the heirs of her father/mother, if she dies without any children of her own, and not upon her husband. Justice Shalini Phansalkar Joshi was hearing a writ petition filed by relatives of one Sundarabai, who died issueless more than 45 years ago on June 18, 1962. Article referred:http://www.livelaw.in/property-inherited-female-hindu-parents-shall-devolve-upon-heirs-father-not-husband-dies-childless-bombay-hc-read-judgment/
Post a Comment
Read more

'Seize assets to pay damages to accident victim'

Her story might be an inspiration for the physically challenged but justice has remained elusive for her. In 2008, a bus accident left research engineer S Thenmozhi, 30, paraplegic. In April 2013, the motor accident claims tribunal directed the Tamil Nadu State Transport Corporation (TNSTC) to provide her a compensation of 57.9 lakh. However, TNSTC refused to budge and on Tuesday a city court ordered attaching of movable assets of the transport corporation. Thenmozhi was employed in C-DOT, a telecom technology development centre in Bangalore. On July 21, 2008, she was coming to Chennai in a private bus. Around 2am, the bus had a flat tyre and the driver parked it on the left side of the road near Pallikonda in Vellore district on the Bangalore-Chennai highway. While the tyre was being changed, a TNSTC bus of Dharmapuri division hit the stationary bus. The rear part of the bus was smashed and passengers were injured. Thenmozhi who had a seat at the back of the bus suffered...
Post a Comment
Read more

Mumbai ITAT rules income of offshore discretionary trust is subject to tax in India

The Mumbai Income Tax Appellate Tribunal (ITAT) has recently determined the following issue in the affirmative in the case of Manoj Dhupelia: Should the income of an offshore discretionary trust be subject to tax in India, if no distributions have been made to beneficiaries in India? The question arose from appeals filed by individual beneficiaries in relation to a Lichtenstein-based trust, the Ambrunova Trust and Merlyn Management SA (the Trust) with the ITAT. It is important to note that the individuals in this case were amongst those first identified by the Government of India (GOI) as holding undeclared bank accounts in Lichtenstein. The ITAT ruling raises the following issues: Taxation of Trust Corpus: ITAT classified the corpus of the trust as "undisclosed income" and declared it taxable in the hands of the beneficiaries. Taxation of Undistributed Income: ITAT refused to draw a distinction between the corpus and undistributed income from the trust and declared i...
Post a Comment
Read more