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TMI Blog2020 (10) TMI 502X X X X Extracts X X X X X X X X Extracts X X X X ..... asonable time. As regards valuation, i.e., where held to be a case of sale, valuation of TDRs shall be with reference to the rate of open land, and not of residential building, inasmuch as these are 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 are (or would be) utilized and, further, with reference to a land with similar development potential therein. This is as only like can be compared with like. Further, the issue of deduction of the TDR cost (₹ 14.42 lacs), i.e., the first issue, being inter-related, we consider it proper to remit the same along with. We may though make it clear that it is not that we entertain any doubt qua the disallowance of TDR cost (₹ 14.42 lakhs) on the basis of the material on record as not valid. Disallowance of the refundable security deposit in computing the assessee s business income for the year - HELD THAT:- The assessee has disposed its rights in land, encumbered by the obligation to re-compense the displaced occupants/ tenants, so that the cost suffered toward the same, by way of its forfeiture or transfer of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Deck Co-operative Housing Society (DDS)), to which (Society) the assessee was obliged to execute a lease, i.e., in respect of the land beneath the said building, @ ₹ 10 per month. The assessee also filed suits (in the Court of Small Causes) for eviction of the twelve occupants of the Serovilla Building (SB). Vide consent decree dated 01.12.2006 (in R.A.E. Suit No. 285/667 of 2003/PB pages 138-156), each of the twelve occupants of the Serovilla flats agreed to vacate their flats (suit premises) by 31.01.2007 to enable the assessee to demolish the Serovilla building and construct a new building in its place, to be completed within a period of twenty-four months, i.e., by 31.01.2009, and latest with a grace period extending up to 30.7.2009. The assessee was required to, and did indeed pay, ₹ 4.50 lakhs to each of the occupants as refundable security deposit, refundable on the assessee handing over the possession of the new flats (admeasuring 480 sq. ft. each) at the site of the SB (proposed to be constructed as stilt plus seven upper floors) by way of permanent alternate accommodation on ownership basis, free-of-cost, i.e., in lieu of the suit premises. Failure to do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any TDRs in respect of the said property, i.e., purchased from the assessee-firm. The AO, accordingly, disallowed same . The TDRs being a valuable right, being admittedly divested by the assessee as on 31.3.2010, he inferred their sale during the year, at ₹ 82.94 lakhs, on the basis of the sale rate applicable to a residential building at Mankhurd area, i.e., one of the two areas from which the TDRs arose. Allowing deduction for the purchase cost of TDRs (₹ 14.42 lacs), the difference of ₹ 68.52 lakhs was brought to tax. In appeal, the ld. CIT(A) confirmed both, the disallowance (for ₹ 14.42 lacs) and the addition (for ₹ 68.52 lacs). He was further of the view that the tenants were not a party to the conveyance deed, which was executed without any reference to them. The period for the construction of a building at the site of Serovilla flats expired in July, 2009, after which the assessee was to pay the occupants ₹ 5,000 per month each. There was nothing in the conveyance deed to show that RSB acknowledged its liability to the tenants, i.e., of having assumed the liability toward the monthly compensation. There was equally nothing to show th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovide the documentary evidences establishing the transaction, i.e., Copy of ITR, Bank A/c statement reflecting the transaction. RSB replied through its counsel, as under: Our client, RSB Developers Private Limited has purchased a property from M/s. Diamond Enterprises vide conveyance deed dated 28-07-2010. Our client, RSB Developers Private Limited has not purchased any TDR in relation to the above mentioned property from M/s. Diamond Enterprises. The ld. counsel for the assessee, Sh. Sathe, also could not, as also before the ld. CIT(A) earlier, answer as to why, in case of sale of TDRs equivalent to 130 sq. mtrs. to RSB, as claimed, does it not find mention in the conveyance dated 28.7.2010, which has rightly been regarded by the ld. CIT(A) as the agreement governing the transaction . Further, even granting so, what, one may ask, prevented the assessee from obtaining a clarification in respect thereof from RSB, the stated purchaser of TDRs. The assessee s claim, made before us, of non-reversion of floor space index (FSI) credit in respect of TDR s, once obtained, made with reference to the approved plan dated 30.9.2006 for the proposed building at the relevant si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very basis for their arising and allocation, i.e., to regularize and monetize the right to develop real estate, and at the same time causing its movement/shift from more congested (high density) to less congested areas. The same, i.e., transfer, may entail cost, including transfer charges, but that is another matter/aspect altogether. We, therefore, find no infirmity in the disallowance of the TDR cost in computing the assessee s (business) income; its claim being wholly unsubstantiated. 3.2 The TDRs having been admittedly sold, the Revenue has estimated their sale value, bringing it to tax after deducting its cost, and which represents the second issue in this appeal. The assessee refutes this as without basis and, in any case, excessive inasmuch as the rate applied is qua a residential building, while the TDR is a right in respect of land, so as to increase its development potential to that extent. In fact, if the obtaining land rate was to be applied, it shall result in a loss of ₹ 9,99,900; the rate for open land at Mankhurd area being ₹ 3,400 per sq. mtr. (refer para 6.4/pgs. 18-19 of the impugned order). In our considered opinion neither the assessee no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nity of hearing to the assessee, including for meeting the evidence that the AO may gather in support of his claim/s. As regards valuation, i.e., where held to be a case of sale, valuation of TDRs shall be with reference to the rate of open land, and not of residential building, inasmuch as these are 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 are (or would be) utilized and, further, with reference to a land with similar development potential therein. This is as only like can be compared with like. Further, the issue of deduction of the TDR cost (₹ 14.42 lacs), i.e., the first issue, being inter-related, we consider it proper to remit the same along with. We may though make it clear that it is not that we entertain any doubt qua the disallowance of TDR cost (₹ 14.42 lakhs) on the basis of the material on record as not valid. The remission in its respect is only by way of an abundant caution so as to avoid any possible contradiction and, thus, any prejudice or injustice in view of our remission qua a related aspect. The onus to substantiate its case, nee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount received, net of ₹ 54 lakhs recoverable from the tenants, is only ₹ 121 lacs, which therefore has been offered to tax. Looked at from the another angle/stand-point, the amount of ₹ 54 lakhs, now no longer receivable, i.e., consequent to the conveyance deed with RSB, is a cost borne by the assessee toward the transfer of its rights in 1517.4 sq. mtrs. of Kole Kalyan land thereto and, thus, accordingly, deductible in computing the income arising to it on the said transfer. The argument is unexceptional. So, however, it does not address the concerns expressed by the Revenue, which forms the basis of the direction for disallowance of the said sum by the ld. CIT(A), discussed as follows. Taking a practical stance, the consent decree is no longer operative in July, 2010, when the conveyance deed was executed, or even in March, 2010, which signifies the receipt of the sale consideration of ₹ 175 lakhs from RSB. That is, the assessee had, by not fulfilling the consent terms, already suffered a loss of ₹ 54 lacs , i.e., prior to and independent of the transaction/agreement with RSB. Put differently, even in the absence of an agreement with RSB, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, accordingly, be regarded as a make-believe, as done by the ld. CIT(A). His other objections to be nonadmissibility of the claim of ₹ 54 lakhs by the assessee are, equally, not well founded. The assessee has disposed its rights in land, encumbered by the obligation to re-compense the displaced occupants/ tenants, so that the cost suffered toward the same, by way of its forfeiture or transfer of the right to receive in favour of the purchaser, whichever way one may look at the transaction, is an associated cost, integral to the said transfer. It cannot, therefore, be regarded as the capital cost. The third objection is of the same arising in the following year. In fact, this is in contradiction of the claim of the loss having already arisen, i.e., independent of, and prior to, the transaction of transfer in March/July, 2010. That apart, when the income arising from the transfer is being subject to tax for AY 2010-11, how could a related cost possibly arise for being claimed/allowed in a subsequent year ? The same militates against the concept of income (or income computation), which is (to be) at net of all expenditure incurred in relation thereto. Reference to the decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to lockdown, held as under:- 10. In the light of the above discussions, we are of the considered view that rather than taking a pedantic view of the rule requiring pronouncement of orders within 90 days, disregarding the important fact that the entire country was in lockdown, we should compute the period of 90 days by excluding at least the period during which the lockdown was in force. We must factor ground realities in mind while interpreting the time limit for the pronouncement of the order. Law is not brooding omnipotence in the sky. It is a pragmatic tool of the social order. The tenets of law being enacted on the basis of pragmatism, and that is how the law is required to be interpreted. The interpretation so assigned by us is not only in consonance with the letter and spirit of rule 34(5), but is also a pragmatic approach at a time when a disaster, notified under the Disaster Management Act 2005, is causing unprecedented disruption in the functioning of our justice delivery system. Undoubtedly, in the case of Otters Club v. DIT [2017] 392 ITR 244 (Bom), Hon ble Bombay High Court did not approve an order being passed by the Tribunal beyond a period of 90 days, but th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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