Section 43CA Inapplicable to Transfer of TDRs as Intangible Rights: ITAT Nagpur

DCIT Vs Khare And Tarkunde Infrastructure Pvt. Ltd. (ITAT Nagpur)

Summary: Transfer of Transferable Development Rights (TDRs) does not attract Section 43CA of the Income Tax Act, 1961, as TDRs constitute intangible rights distinct from land or building.

Core Issue: Whether the provisions of Section 43CA of the Income Tax Act, 1961, apply to the transfer of Transferable Development Rights (TDRs) held as stock-in-trade, requiring substitution of the actual sale consideration with the stamp duty value or market value.

Facts: The assessee, a company engaged in civil construction and infrastructure development, filed its return of income for Assessment Year 2016-17 declaring total income of Rs. 18,32,36,180. During the relevant previous year, the assessee transferred TDRs for a consideration of Rs. 6,51,63,000, whereas the market value was determined at Rs. 12,08,35,000. The Assessing Officer observed that the assessee had not computed income from the transfer in accordance with Section 43CA and proposed to substitute the market value for the actual consideration.

AO/CIT(A) Findings: The Assessing Officer rejected the assessee’s contention that TDRs constituted intangible rights distinct from land or building and made an addition of Rs. 5,56,72,000 under Section 43CA, being the difference between the market value and the actual consideration. On appeal, the CIT(A) held that TDRs did not fall within the ambit of Section 43CA, which specifically covered land or building or both. The CIT(A) observed that extending the deeming provision to intangible development rights would amount to an incorrect interpretation of the statutory provision and accordingly deleted the addition.