2012 (4) TMI 820 - AT - Income Tax

Summary

Issues involved: Challenge to addition made by A.O. towards sale of Transfer of Development Rights (TDR) for A.Y. 2006-07.

Core Issue: Whether the amount received from the sale of TDR should be treated as income for A.Y. 2006-07.

The assessee, a partnership firm engaged in construction activities under the Slum Rehabilitation Programme, challenged the addition made by the Assessing Officer (A.O.) towards the sale of TDR amounting to Rs. 2,67,29,696 for A.Y. 2006-07. The A.O. contended that the amount should have been treated as income in that assessment year. The assessee argued that the TDR was directly linked to ongoing Slum Rehabilitation Projects and should be recognized as income only when the projects are completed. The A.O. and the Ld. CIT (A) rejected the assessee's explanation. The matter was brought before the Appellate Tribunal ITAT Mumbai.

The Appellate Tribunal considered the submissions and records. The Ld. Counsel for the assessee cited relevant case laws to support the contention that income from the sale of TDR should be recognized when the projects are completed. The Tribunal noted that the Slum Rehabilitation Projects were not completed in A.Y. 2006-07 and the TDR had a direct nexus with these projects. Relying on the decision of the jurisdictional High Court, the Tribunal allowed the assessee's appeal and directed the A.O. to verify if the TDR amount was offered in A.Y. 2008-09 when the projects were completed. If so, the amount should not be taxed in A.Y. 2006-07. The A.O. was instructed to provide the assessee with a fair opportunity to be heard. Consequently, the assessee's appeal was allowed.

The judgment highlights the importance of recognizing income from the sale of TDR in alignment with the completion of relevant projects, as per the Project Completion Method of accounting.