MAJESTIC PREMISES PVT. LTD,MUMBAI vs. DCIT CC -2 , THANE

Appellant by : Mani Jain & Prateek Jain Respondent by : Mehul Jain Date of Hearing 24.11.2022 Date of Pronouncement 30.11.2022 आदेश / O R D E R Per Amarjit Singh (AM): The present appeal filed by the assessee is directed against the order passed the CIT(A)-11, Pune, dated 09.03.2022 for A.Y. 2013-14. The assessee has raised the following grounds before us: “1. On the facts and circumstance of the Appellant's case and in law the Id CIT (A) erred in confirming the action of Id. A.O. in making addition of Rs.1,03,83,721/- under the head income from business and profession on account of sale of TDR as per the reasons stated in the impugned order or otherwise.

2. The appellant craves leaves to alter, amend, withdraw or substitute any ground or grounds or to add any new ground or grounds of appeal on or before the hearing.”

2 Magestic Premises Pvt. Ltd. Vs. DCIT, CC-2

Sr. No. Date of TDR TDR No. Details of Area (in Amount (in sale Land sq. mts) Rs.) 1. 09.08.2012 2005/65/TMC/TDD/ Tikka No.9 124.92 21,52,000/- 265 dtd. 29.11.2011 CTS No.4B(1) and 5B(1) 2. 08.01.2013 RC No. Tikka No. 9, 200 43,05,000/- Reservation//112- CTS No. TDR/2/Res/55/2007 4B(1) and 5B dt. (1) 3. 10.01.2013 RC-112, Sector-II Tikka No. 10, 330 70,00,000/- CTS No. 155/A2/ 4. 31.10.2013 RC-112, Sector –II Tikka No. 10, 350 75,00,000 CTS No. 155/A-2 The AO has further noticed that assessee has purchased the TDR during the years for the amount of Rs.97,12,010/- as mentioned below:

Sr. No. Date of TDR TDR No. Details of Land Area (in sq. Amount (in purchase mts.) Rs.) 1. 01.09.2009 RC-112, Sector-II Tikka No. 10, 880 97,12,010/- 14.07.2009 CTS No. 155/A-2/ 2. 29.11.2011 2005/65/TMC/TDD/26 Tikka No. 124.92 NIL 5 dated 29.11.2011 9,CTS No.4B(1) and 5B(1) 3. 29.11.2011 2005/65/TMC/TDD/26 Tikka No. 9, 128.75 NIL 5 dtd. 29.11.2011. CTS No. 4B(1) and 5B(1)

3 Magestic Premises Pvt. Ltd. Vs. DCIT, CC-2 On query the assessee explained that it has deduced the sale proceeds amounting to Rs.2,53,87,752/- from the work in progress. However, the A.O has not agreed with the submission of the assessee and he was of the view that the cost of TDR amounting to Rs.97,12,010/- was proposed to be deducted from closing work in progress of assessment year 2013- 14 and the same should have been at Rs.41,65,89,849/- (42,63,01,859 – 97,12,010). Therefore, the difference between the sale consideration and the cost of TDR was computed by the A.O. at Rs.1,34,87,990/- and same was treated as profit on sale of TDR and added to the total income of the assessee.

“8.1 I have considered the facts of the case and the submissions made by the appellant. Before examining the facts of the present case, it is important to examine the ratio laid down by the Hon'ble Mumbai Tribunal in the cases of M/s Skylark Builders (supra), DBS Realty (supra) and DKP Engineers and Construction Pvt Ltd (supra). A perusal of these case laws suggests that the ratio laid down by the Hon'ble Tribunal is that whenever the receipts on sale of TDRs are directly linked to the execution of the project, in that case, the receipts should be reduced from the cost of the project, because, such receipts are incidental to the entire project under taken by the assessee. A further perusal of these case laws suggests that the Hon'ble Mumbai: Tribunal after examining the facts of each case held that in those cases, the TDR receipts were directly linked to the execution of the project. In the case of M/s Skylark Builders (surpa), the TDRS were received in lieu of handing over a portion of project and thus, the Hon'ble Mumbai Tribunal held that the TDRS were directly linked to the execution of project. Thus, the facts of the case of M/s Skylark Builders are different than the facts of the present case. Similarly, the facts of other two cases relied upon by the appellant are different than the facts of the present case. 8.2 As explained earlier in this order, the mode as well as purpose of acquisition of both type of TDRs Le. TDRS purchased from the open market and TDRs allotted by the TMC are different. In fact, the appellant itself has given different treatments to sale consideration on these TDRs in its books of account. As far as, sale of TDRs which were purchased from the open market, is concerned, it may be mentioned that TDR is a separate right available to a person which can be transferred in the open market. The TDR No. TDR/2/Res/55/2007 (880 sq m) was acquired by the appellant from the open market in FY 2009-10 for 4 Magestic Premises Pvt. Ltd. Vs. DCIT, CC-2 a consideration of Rs: 97.12.010/-. These TDRS can be used in any project by any one and were not linked to any specific project. The appellant did not acquire these TDRS by virtue of execution of any specific project. Thus, it cannot be said that the TDR corresponding to 880 sq m was directly linked to any specific project undertaken by the appellant. The appellant has also filed the copies of agreement for transfer of these TDRS entered into by the appellant and these agreements do not suggests that there was any restriction on utilization of these TDRs for any specific project. Therefore, it cannot be said that the income on sale of these TDRS is inextricably linked to the execution of any specific project. Also the fact that the appellant itself has offered profit amounting to Rs. 90,92,990/- in the next assessment year ie. A.Y 2014-15, shows that the income on sale of these TDRS is not directly linked to the project undertaken by the appellant. Accordingly, the claim of the appellant that no income should be chargeable to tax on the sale of these TDRS because these receipts are linked to the execution of the project, cannot be accepted. 8.3 The alternate argument of the appellant is that, since the income of Rs 90,92,990/- has been offered in the subsequent assessment year ie AY 2014-15, taxing the same in AY 2013-14 shall amount to double taxation. The appellant has submitted that due to certain procedural formalities, these TDRs could be finally transferred only in AY 2014-15, therefore, the income has been offered in A.Y 2014-15 This claim of the appellant has been examined From the details filed, it is seen that the TDR purchased from open market in FY 2009-10 were sold to three different parties. The details of sale consideration and date of registration of agreement transferring these TDRs are as under: Sr. No. Area of TDR (sq. Name of the buyer Consideration Date of registration mtr) of agreement 1. 200 Gaurang 43,05,000/- 08.01.2013 Associates 2. 330 H.R. Group 70,00,000/- 10.01.2013 3. 350 Jagdamb 75,00,000/- 31.10.2013 Construction Co. 8.4. As per prevalent practice, TDRs stands transferred once the sale consideration is received and the Agreement for Transfer of Development Right is registered with the competent authority. The above table clearly suggests that sale of TDRs to M/s Gaurang Associates and M/s HR. Group were completed in the FY 2012-13 on registration of Agreement to Transfer of TDRs. Although, the appellant has submitted. that certain procedural formalities were completed in FY 2013-14, however, details of any such formality which was left to be completed after the registration of agreement and was completed in next year, has not been indicated by the appellant. Thus, the claim of the appellant that the sale of these two TDRs was not completed during the year under consideration cannot be accepted. It may also be mentioned that it is a well settled legal position that income has to be taxed in the assessment year in which it has accrued. Neither the assessee nor the revenue has a choice to tax the income in any assessment year other than the year in which same is taxable. Since, the transfer of TDRS to Gaurang Properties and M/s HR. Group was completed in FY 2012-13, therefore, the income arising on sales to these two parties shall be taxable in AY 2013-14 only. As far as, the sale of TDR to M/s Jagdamb Construction Co is concerned, it 5 Magestic Premises Pvt. Ltd. Vs. DCIT, CC-2 is seen that the agreement was registered on 31/10/2013. In fact, the Assessing Officer in the table at page 3 of the assessment order has also mentioned the date of this particular TDR sale as 31/10/2013. In these facts, the income on sale of transfer of TDR to M/s Jagdamb Construction Co becomes taxable in AY 2014-15 and not in AY 2013-14 In this manner, the income taxable on account of sale of TDR to Gaurang Properties and M/s H R. Group is worked out as under: Sale consideration of TDRS transferred= Rs. 1,13,05,000/-(4,305,000+70,00,000) Cost of TDR (530/880 x 97,12,010/-) = Rs 58,49,279/- Profit = Rs. 54,55,721/- 4. Heard both the sides and perused the material on record. The assessee company had undertaken project namely Kopat Property Project (Oasis Saphire) commercial project plot which was purchased in F.Y. 2007-08. On the basis of the area of the aforesaid plot the assessee was eligible for TDR (Transferable Development Right) @ 40% of the area of the plot as per the terms of the Thane Municipal Corporation. Accordingly, assessee purchased TDR of 880 sq. mtr. for sum of Rs.97,12,010/-. In view of the approved project, the assessee had also surrendered land area for the development of road etc. In lieu of surrendering the land area assessee got TDR of 128.75 sq. mtr. and 125.95 sq. mtr respectively without any cost. The assessee has initiated the project and shown work in progress for assessment year 2010-11 to assessment year 14-15 as per the break up given at page no. 25/32 of the paper book filed by the ld. Counsel during the course of appellate proceedings before us. On the said plot the assessee had incurred construction expenses to the amount of Rs.1.88 crores. The project was under work in progress stage and the assessee company has followed consistently percentage completion method of revenue recognition on the basis of advance received. However, subsequently, the assessee company has scrapped the project, therefore, TDR purchased as well as allotted by the Thane municipal corporation become unusable, therefore same were 6 Magestic Premises Pvt. Ltd. Vs. DCIT, CC-2