JUDGMENT This income-tax appeal challenges order passed on March 30, 2012, in Income Tax Appeal No. 431/Mum/2012. assessment year is 2007-08. Income-tax Appellate Tribunal ("the ITAT") was dealing with appeal of respondent-assessee. That appeal was directed against order of Commissioner of Income-tax (Appeals) dated November 30, 2011, whereunder he upheld validity of assessment made by Assessing Officer under section 143(3) read with section 147 of Income-tax Act, 1961. He confirmed addition of Rs. 2,23,25,157 made by Assessing Officer to total income of assessee under head "Long-term capital gains". Mr. Malhotra, appearing on behalf of Revenue, in support of this appeal, submits that this appeal raises substantial question of law. That is formulated at page 7 of appeal paper book. Mr. Malhotra would submit that gains are derived from sale of transferable development right (TDR) of co-operative housing society which is property by itself. In such circumstances, Tribunal should have sustained order of Commissioner and that of Assessing Officer. That should have been sustained because Tribunal ought to have noted that this co-operative housing society planned reconstruction of building without involving any builder. That was in year 1994. In year 1995, construction of new building was in execution and society was eligible for floor space index (FSI) of 2. construction was carried out and completed. Thereafter, FSI of 0.5 was generated by society's property/plot and it decided to sell it. That was sold to one Uttam Kamat under agreement dated June 1, 2006, for total consideration of Rs. 2,23,25,157. This amount has been held by Assessing Officer to be chargeable to tax as income under head "Long-term capital gains" in hands of assessee in year under appeal. That was confirmed by Commissioner of Income-tax (Appeals). Mr. Malhotra has invited our attention to section 54E of Income-tax Act and submitted that sub-section which has been invoked in this case together with Explanation would denote that this was case where gains were derived by assessee. Once gains were derived in manner set out in this section, then computation thereof has been done in accordance with law. There was no necessity of interfering with order passed and concurrently. On other hand, Mr. Singh, appearing on behalf of assessee, would submit that Tribunal has rightly appreciated controversy. It was identical to two cases dealt with earlier. One in case of New Shilaja Co-operative Housing Society Ltd. and another was Shakti Insulated Wires Ltd. Tribunal has assigned reasons for arriving at conclusion. That conclusion is recorded by Tribunal in paragraph 7 and paragraph 9 of order under challenge. Tribunal has rightly understood concept and where there was no mechanism evolved by Revenue so as to compute gains then order under challenge cannot be said to be erroneous much less perverse requiring interference in our further appellate jurisdiction. appeal does not raise any substantial question of law and deserves to be dismissed. Reliance is placed by Mr. Singh on decision of hon'ble Supreme Court in case of Union of India v. Cadell Weaving Mill Co. P. Ltd. reported in [2005] 273 ITR 1 (SC). We have heard both sides at great length and with their assistance, we have perused order passed by Tribunal and that of Commissioner of Income-tax (Appeals) and Assessing Officer. Assessing Officer has noted basic facts and about which there is no dispute. What has been argued before Assessing Officer is that with promulgation of Development Control Rules, 1991 (DCR), assessee-society acquired right of putting up additional construction through TDR. Instead of utilising this right itself, society decided to transfer same to developer for consideration. society transferred valuable right, which is capital asset under section 2(14) of Income-tax Act. right created by DCR attaches to land owned by society which was acquired for value. Its title or ownership of plot enables society to consume this FSI/TDR. In such circumstances, this is transfer of capital asset held by society, which is chargeable to tax. Commissioner of Income-tax (Appeals), in confirming this finding of Assessing Officer, distinguished case of New Shailaja Co- operative Housing Society. In case under consideration, society was eligible for FSI of 2.5. That society only consumed 2 FSI out of its eligible FSI and not additional FSI. It is only sale of unconsumed FSI. This is not case that extra FSI had accrued because of change in law. TDR has been that extra FSI had accrued because of change in law. TDR has been granted as per law existed at time of reconstruction of assessee's building/property. letter dated September 17, 2003, was relied upon. That is how sale consideration of TDR was taxable as longterm capital gains in hands of assessee. Tribunal noted this aspect and concluded that while it is true that Assessing Officer invoked section 50C and computed these gains but co- ordinate Bench decision in case of New Shailaja Co-operative Housing Society Ltd. involved similar controversy and Tribunal concluded that sale of TDR does not give rise to any capital gains chargeable to tax. Tribunal's conclusion is that situation and factually in both cases is identical. While it is true that Revenue has not pursued matter in case of New Shailaja Co-operative Housing Society Ltd. because report of registry indicates that appeal was brought to challenge that order but came to be dismissed for non-compliance with office objections. However, on pertinent question as to how computation of this sale of TDR could be made and in terms of legal provisions, reliance is placed on section 50C of Income-tax Act. other provision and which has been relied upon in this case is sub- section (2) of section 55. Both these provisions read as under: "50C. (1) Where consideration received or accruing as result of transfer by assessee of capital asset, being land or building or both, is less than value adopted or assessed or assessable by any authority of State Government (hereafter in this section referred to as the'stamp valuation authority') for purpose of payment of stamp duty in respect of such transfer, value so adopted or assessed or assessable shall, for purposes of section 48, be deemed to be full value of consideration received or accruing as result of such transfer. (2) Without prejudice to provisions of sub-section (1) where-- (a) assessee claims before any Assessing Officer that value adopted or assessed or assessable by stamp valuation authority under sub- section (1) exceeds fair market value of property as on date of transfer; (b) value so adopted or assessed or assessable by stamp valuation authority under sub-section (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, court or High Court, Assessing Officer may refer valuation of capital asset to Valuation Officer and where any such reference is made, provisions of sub-sections (2), (3), (4), (5) and (6) of section 16A, clause (i) of sub-section (1) and sub-sections (6) and (7) of section 23A, subsection (5) of section 24, section 34AA, section 35 and section 37 of Wealth-tax Act, 1957 (27 of 1957), shall, with necessary modifications, apply in relation to such reference as they apply in relation to reference made by Assessing Officer under sub-section (1) of section 16A of that Act. Explanation 1.-For purposes of this section'Valuation Officer' shall have same meaning as in clause (r) of section 2 of Wealth-tax Act, 1957 (27 of 1957). Explanation 2.- For purposes of this section, expression 'assessable' means price which stamp valuation authority would have, notwithstanding anything to contrary contained in any other law for time being in force, adopted or assessed, if it were referred to such authority for purposes of payment of stamp duty. (3) Subject to provisions contained in sub-section (2), where value ascertained under sub-section (2) exceeds value adopted or assessed or assessable by stamp valuation authority referred to in sub-section (1), value so adopted or assessed or assessable by such authority shall be taken as full value of consideration received or accruing as result of transfer." "55. (2) For purposes of sections 48 and 49,'cost of acquisition',- (a) in relation to capital asset, being goodwill of business or trade mark or brand name associated with business, or right to manufacture, produce or process any article or thing or right to carry on any business, tenancy rights, stage carriage permits or loom hours,- (i) in case of acquisition of such asset by assessee by purchase from previous owner, means amount of purchase price; and (ii) in any other case not being case falling under sub-clauses (i) to (iv) of sub-section (1) of section 49, shall be taken to be nil; (aa) in case where, by virtue of holding capital asset, being share or any other security, within meaning of clause (h) of section 2 of Securities Contracts (Regulation) Act, 1956 (42 of 1956) (hereafter in this clause referred to as financial asset), assessee- (A) becomes entitled to subscribe to any additional financial asset; or (B) is allotted any additional financial asset without any payment, then, subject to provisions of sub-clauses (i) and (ii) of clause (b),- (i) in relation to original financial asset, on basis of which assessee becomes entitled to any additional financial asset, means amount actually paid for acquiring original financial asset; (ii) in relation to any right to renounce said entitlement to subscribe to financial asset, when such right is renounced by assessee in favour of any person, shall be taken to be nil in case of such assessee; (iii) in relation to financial asset, to which assessee has subscribed on basis of said entitlement, means amount actually paid by him for acquiring such asset; and (iiia) in relation to any financial asset purchased by any person in whose favour right to subscribe to such asset has been renounced, means aggregate of amount of purchase price paid by him to person renouncing such right and amount paid by him to company or institution, as case may be, for acquiring such financial asset; (ab) in relation to capital asset, being equity share or share allotted to shareholder of recognised stock exchange in India under scheme for demutualisation or corporatisation approved by Securities and Exchange Board of India established under section 3 of Securities and Exchange Board of India Act, 1992 (15 of 1992), shall be cost of acquisition of his original membership of exchange: Provided that cost of capital asset, being trading or clearing rights of recognised stock exchange acquired by shareholder who has been allotted equity share or shares under such scheme of demutualisation or corporatisation, shall be deemed to be nil; (b) in relation to any other capital asset,-- (i) where capital asset become property of assessee before 1st day of April, 1981, means cost of acquisition of asset to assessee or fair market value of asset on 1st day of April, 1981, at option of assessee; (ii) where capital asset became property of assessee by any of modes specified in sub-section (1) of section 49, and capital asset became property of previous owner before 1st day of April, 1981, means cost of capital asset to previous owner or fair market value of asset on 1st day of April, 1981, at option of assessee; (iii) where capital asset became property of assessee on distribution of capital asset of company on its liquidation and assessee has been assessed to income-tax under head 'Capital gains' in respect of that asset under section 46, means fair market value of asset on date of distribution;... (v) where capital asset, being share or stock of company, became property of assessee on- (a) consolidation and division of all or any of share capital of company into shares of larger amount..." bare reading thereof would indicate how Legislature contemplates that income chargeable under head "Capital gains" has to be computed. mode of computation is laid down by section 48, whereas by section 49, cost with reference to certain modes of acquisition has been set out. For purposes of both sections, Legislature has devised scheme in section 55 and sub-section (2) thereof clarifies that for purposes of sections 48 and 49, "cost of acquisition" in relation to capital asset, being goodwill of business or "cost of acquisition" in relation to capital asset, being goodwill of business or trade mark or brand name associated with business or right to manufacture, produce or process any article or thing or right to carry on any business, tenancy rights, stage carriage permits or loom hours has to be computed. In this case, assessee stated that nothing of these things would cover sale of TDR and in absence of specific provision, income shall be taken to be nil. In judgment relied upon by Mr. Singh in case of Union of India v. Cadell Weaving Mill Co. P. Ltd. (supra), argument before hon'ble Supreme Court was arising out of return of income of assessee. amount received by assessee on surrender of tenancy right, whether liable to capital gains under section 45 of Income-tax Act, 1961, was involved in that appeal before hon'ble Supreme Court. There was lease agreement entered into in year 1959 for 50 years, under which, annual rent was paid by lessee to lessor. lease would have continued till 2009. However, during relevant previous year, i.e., in March, 1986, assessee surrendered tenancy rights prematurely and received sum of Rs. 35 lakhs. That sum was credited to reserve and surplus account, which was disallowed by Assessing Officer, holding that it was income from other source. assessee appealed to Commissioner, who came to conclusion that assessee was liable to pay tax on capital gains on amount of Rs. 35 lakhs after deducting amount of Rs. 7 lakhs as cost of acquisition. Department and assessee challenged decision before Tribunal and Tribunal relied upon judgment of hon'ble Supreme Court in case of CIT v. B. C. Srinivasa Setty [1981] 128 ITR 294 (SC) and amendment to section 55(2) of Income-tax Act and held that assessee did not incur any cost to acquire leasehold rights and that if at all any cost had been incurred it was incapable of being ascertained. It was, therefore, held that since capital gains could not be computed as envisaged in section 48 of Income-tax Act, therefore, capital gains earned by assessee, if any, was not exigible to tax. Department's appeal to High Court was dismissed and that is how it approached hon'ble Supreme Court. In dealing with rival contentions, hon'ble Supreme Court held as under (page 5 of 273 ITR): "In 1981 this court in CIT v. B. C. Srinivasa Setty [1981] 128 ITR 294 (SC); [1981] 2 SCC 460; held that all transactions encompassed by section 45 must fall within computation provisions of section 48. If computation as provided under section 48 could not be applied to particular transaction, it must be regarded as'never intended by section 45 to be subject of charge'. In that case, court was considering whether firm was liable to pay capital gains on sale of its goodwill to another firm. court found that consideration received for sale of goodwill could not be subjected to capital gains because cost of its acquisition was inherently incapable of being determined. Pathak J., as his Lordship then was, speaking for court, said (page 300 of 128 ITR): 'What is contemplated is asset in acquisition of which it is possible to envisage cost. intent goes to nature and character of asset, that it is asset which possess inherent quality of being available on expenditure of money to person seeking to acquire it. It is immaterial that although asset belongs to such class it may, on facts of certain case, be acquired without payment of money.' In other words, asset which is capable of acquisition at cost would be included within provisions pertaining to head'Capital gains' as opposed to assets in acquisition of which no cost at all can be conceived. principle propounded in B. C. Srinivasa Shetty [1981] 128 ITR 294 (SC) has been followed by several High Courts with reference to consideration received on surrender of tenancy rights (see among others Bawa Shiv Charan Singh v. CIT [1984] 149 ITR 29 (Delhi); CIT v. Mangtu Ram Jaipuria [1991] 192 ITR 533 (Cal); CIT v. Joy-Ice Creams (Bangalore) P. Ltd. [1993] 201 ITR 894 (Karn); CIT v. Markapakula Agamma [1987] 165 ITR 386 (AP); CIT v. Merchandisers P. Ltd. [1990] 182 ITR 107 (Ker). In all these decisions several High Courts held that if cost of acquisition of tenancy rights cannot be determined, consideration received by reason of surrender of such tenancy rights could not be subjected to capital gains tax. According to circular issued by Central Board of Direct Taxes (Circular No. 684, dated June 10, 1994-see [1994] 208 ITR (St.) 8 it was to meet situation created by decision in B. C. Srinivasa Setty [1981] 128 ITR 294 situation created by decision in B. C. Srinivasa Setty [1981] 128 ITR 294 (SC) and subsequent decisions of High Court that Finance Act, 1994, amended section 55(2) to provide that cost of acquisition of, inter alia, tenancy right would be taken as nil. By this amendment, judicial interpretation put on capital assets for purposes of provisions relating to capital gains was met. In other words cost of acquisition would be taken as determinable but rate would be nil. amendment took effect from April 1, 1995, and, accordingly, applied in relation to assessment year 1995-96 and subsequent years. But till that amendment in 1995, and, therefore, covering assessment year in question, law as perceived by Department was that if cost of acquisition of capital asset could not in fact be determined, transfer of such capital asset would not attract capital gains. appellant now says that B. C. Srinivasa Setty's case [1981] 128 ITR 294 (SC) would have no application because tenancy right cannot be equated with goodwill. As far as goodwill is concerned, it is impossible to specify date on which acquisition may be said to have taken place. It is built up over period of time. Diverse factors which cannot be quantified in monetary terms may go into building of goodwill, some tangible some intangible. It is contended that tenancy right is not capital asset of such nature that actual cost on acquisition could not be ascertained as natural legal corollary. We agree. tenancy right is acquired with reference to particular date. It is also possible that it may be acquired at cost. It is ultimately question of fact. In A. R. Krishnamurthy v. CIT [1989] 176 ITR 417 (SC) this court held that it cannot be said conceptually that there is no cost of acquisition of grant of lease. It held that cost of acquisition of leasehold rights can be determined. In present case, however, Department's stand before High Court was that cost of acquisition of tenancy was incapable of being ascertained. In view of stand taken by Department before High Court, we uphold decision of High Court on this issue. Were it not for inability to compute cost of acquisition under section 48, there is, as we have said, no doubt that monthly tenancy or leasehold right is capital asset and that amount of receipt on its surrender was capital receipt. But because we have held that section 45 cannot be applied, it is not open to Department to impose tax on such capital receipt by assessee under any other section. This court, as early as in 1957 had, in United Commercial Bank Ltd. v. CIT [1957] 32 ITR 688 (SC), held that heads of income provided for in sections of Indian Income-tax Act, 1922, are mutually exclusive and where any item of income falls specifically under one head, it has to be charged under that head and no other. In other words, income derived from different sources falling under specific head has to be computed for purposes of taxation in manner provided by appropriate section and no other. It has been further held by this court in East India Housing and Land Development Trust Ltd. v. CIT [1961] 42 ITR 49 (SC) that if income from source falls within specific head, fact that it may indirectly be covered by another head will not make income taxable under latter head (see also CIT v. Chugandas and Co. [1965] 55 ITR 17 (SC)). Section 14 of Income-tax Act, 1961, as it stood at relevant time, similarly provided that'all income shall for purposes of charge of income-tax and computation of total income be classified under six heads of income,' namely:- '(A) Salaries; (B) Interest on securities; (C) Income from house property; (D) Profits and gains of business or profession; (E) Capital gains; (F) Income from other sources unless otherwise, provided in Act.' Section 56 provides for chargeability of income of every kind which has not to be excluded from total income under Act, only if it is not chargeable to income-tax under any of heads specified in section 14, items to E. Therefore, if income is included under any one of heads, it cannot be brought to tax under residuary provisions of section 56. There is no dispute that tenancy right is capital asset surrender of which would attract section 45 so that value received would be capital receipt and assessable if at all only under item E of section 14. That being so, it cannot be treated as casual or nonrecurring receipt under section 10(3) and be subjected to tax under section 56. argument of appellant that even if income cannot be chargeable under section 45, because of inapplicability of computation provided under section 48, it could still impose tax under residuary head is thus unacceptable. If income cannot be taxed under section 45, it cannot be taxed at all (see S. G. Mercantile Corporation P. Ltd. v. CIT [1972] 83 ITR 700 (SC)). Furthermore, it would be illogical and against language of section 56 to hold that everything that is exempted from capital gains by statute could be taxed as casual or non-recurring receipt under section 10(3) read with section 56. We are fortified in our view by similar argument being rejected in Nalinikant Ambalal Mody v. S. A. L. Narayan Row, CIT [1966] 61 ITR 428 (SC), 432, 435." Thus, conclusion of hon'ble Supreme Court is that asset which is capable of acquisition at cost would be included within provisions pertaining to head "Capital gains" as opposed to assets in acquisition of which no cost at all can be conceived. In present case as well, situation was that FSI/TDR was generated by plot itself. There was no cost of acquisition, which has been determined and on basis of which Assessing Officer could have proceeded to levy and assess gains derived as capital gains. It may be that sub-section (2) of section 55 clause (a) having been amended, there is stipulation with regard to tenancy rights. However, even in case of tenancy rights, view taken by hon'ble Supreme Court, after provision was substituted with effect from April 1, 1995, is as above. further argument is that tenancy rights now can be brought within tax net and in present case asset or benefit is attached to property. It is capable of being transferred. All this may be true but as hon'ble Supreme Court holds it must be capable of being acquired at cost or that has to be ascertainable. In present case, additional FSI/TDR is generated by change in D. C. Rules. specific insertion would, therefore, be necessary so as to ascertain its cost for computing capital gains. Therefore, Tribunal was in no error in concluding that TDR which was generated by plot/property/land and came to be transferred under document in favour of purchaser would not result in gains being assessed to capital gains. factual backdrop is noted by Tribunal in paragraph 3 and, thereafter, rival contentions. Tribunal concluded and relying upon its order passed in two other cases that what assessee sold was TDR received as additional FSI as per D. C. Regulations. It was not case of sale of development rights already embedded in land acquired and owned by assessee. Tribunal's conclusion and further to be found in paragraph 11 is based on its view taken in case of New Shailaja Cooperative Housing Society Ltd. Tribunal has reproduced that conclusion. Tribunal's conclusion arrived at in case of New Shailaja Cooperative Housing Society Ltd. is based on hon'ble Supreme Court's decision in case ofB. C. Srinivasa Setty (supra). Tribunal concluded that assessee had not incurred any cost of acquisition in respect of right which emanated from 1991 Rules making assessee eligible to additional FSI. land and building earlier in possession of assessee continued to remain with it. Even after transfer of right or additional FSI, position did not undergo any change. Revenue could not point out any particular asset as specified in sub-section (2) of section 55. conclusion of Tribunal is imminently possible and in given facts. That is also possible in light of legal position as noted by language of section 55(2) and judgment of hon'ble Supreme Court, which is in field. We have made reference to all these materials only because Mr. Malhotra tried to persuade us to conclude that this aspect is also specified in sub-section (2) of section 55 and that is how Tribunal's view is vitiated by error of law apparent on face of record. We are not persuaded to hold so in light of above discussion. In such circumstances, Tribunal's order cannot be termed as perverse either. appeal does not raise any substantial question of law. It is dismissed, but without any order as to costs. *** Commissioner of Income-tax v. Sambhaji Nagar Co-op. Hsg. Society Ltd.