| The Tax Publishers2020 TaxPub(DT) 4227 (Mum-Trib) INCOME TAX ACT, 1961
Section 28(i)
There was nothing to show or exhibit the sale of TDRs to RSB, for the assessee to claim the cost thereof, but that does not by itself demonstrate their sale to any other person non-reflection of the said TDRs in the assessee's balance-sheet (as on 31-3-2010), on which it relied for the purpose, was of little consequence in view of the admitted position of the assessee having charged their cost to the P&L account for the year, claiming it was a deductible expense.
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Business income - Real estate transaction - Cost of TDRs right -
Assessee, a Mumbai based partnership firm, in the business of development of real-estate, purchased, vide indenture dated 6-8-1985, non-agricultural land admeasuring 1517.4 sq. mtrs. at Village Kole Kalyan, Kalina, Santacruz (East), Mumbai (together with building consisting of ground and two upper floors, called 'Serovilla' Building) for a consideration of Rs. 175 lakhs. Though assessee obtained vacant possession of the Serovilla Building (from the occupants), it did not construct any building nor, as it appears, even demolish the Serovilla building. Assessee, vide conveyance deed dated 28-7-2010, sold its rights in the 1517.4 sq.mrts. of land to M/s. RSB Developers (P) Ltd. ('RSB') for a consideration of Rs. 175 lakhs. There was, however, no mention or reference to the TDRs (or of sale/transfer thereof) in the conveyance deed. RSB, with whom the AO communicated in the matter, while acknowledging the purchase of property from the assessee vide conveyance deed dated 28-7-2010, declined, i.e., on enquiry by the AO, to have purchased any TDRs in respect of the said property, i.e., purchased from the assessee-firm. CIT(A) confirmed both the disallowance (for Rs. 14.42 lakhs) and the addition (for Rs. 68.52 lakhs. Held: There was nothing to show or exhibit the sale of TDRs to RSB, for assessee to claim the cost thereof, but that does not by itself demonstrate their sale to any other person. The Revenue should have insisted on the assessee producing some authentic document/material with regard to the obtaining status of those rights, which could then be verified, before imputing their sale by the assessee during the relevant year. Why, could it itself make enquiry with the registering authority. Non-reflection of the said TDRs in the assessee's balance-sheet (as on 31-3-2010), on which it relied for the purpose, was of little consequence in view of the admitted position of the assessee having charged their cost to the P&L account for the year, claiming it as a deductible expense. The matter, therefore, was indeterminate, and was accordingly restored back to the file of the AO for consideration afresh. Valuation of TDRs shall be with reference to the rate of open land, and not of residential building, inasmuch as these were development rights of land. The land location, in case of estimation, shall not be, as also observed during hearing, where the TDRs arose, but where these were (or would be) utilized and, further, with reference to land with similar development potential therein. This is as only like can be compared with like.
REFERRED :
FAVOUR : Matter remanded.
A.Y. : 2010-11
INCOME TAX ACT, 1961
Section 28(i)
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