TDR completes when possession of land given with it

auditBy Accommodation Times News Services

The dispute is regarding assessment of income receivable by the assessee from the transfer of development rights. The case of the assessee is that granting of development rights was an integral part of development project which was one indivisible project and therefore, the income had to be assessed @ 25% as part of the development project. We, are however unable to accept the claim made by the assessee. The assessee had development rights in respect of certain piece of land. The assessee instead of developing the land, transferred the development rights in respect of part of the land to a separate construction company. As per the agreement, the assessee jointly with the trust was required to convey the land to the proposed buyers and possession of the land had also been given during the year along with development rights. Thus instead of developing land, the assessee parted with the development rights in respect of part of the land forever. This was an independent activity having no connection with the development of the remaining part of the land. The assessee was following mercantile system of accounting as per which income accrues when it becomes due for payment. In this case, the entire amount became due to the assessee in the relevant year on signing of development agreement and on handing over of the possession of the land. The transfer was complete during the year and income, therefore, had accrued during the year as in mercantile system of accounting, accrual of income does not depend upon receipt of income. The postponement of payment does not stop accrual of income. Therefore, even if part of the payments were received in subsequent years, the entire income had accrued during the year.

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