Transferable Development Rights (TDRs) is accrued liability and not a contingent liability

Transferable Development Rights (TDRs) is accrued liability and not a contingent liability The Income Tax Appellate Tribunal (ITAT) in the case of M/s Neelkamal Realtors Suburban Pvt. Ltd. Vs ACIT held that provision made in respect of purchase of transferable development rights (tdrs) are allowable expenditure. In this matter, assessee had shown Rs. 6,08,67,000/- as provision for purchase of Transferable Development Rights. According to the assessee, it was an accrued liability and since the assessee was following percentage completion method, out of the total of Rs. 6,08,67,000/- as sum of Rs. 4,08,22,351/- had already been allowed as deduction in computing profits of the business up to 31st March, 2015. Applying the same percentage completion method for this year a sum of Rs. 9,26,837/- was claimed as deduction. The learned Assessing Officer disallowed the same stating that assessee has made provision of probable future purchase and the amount had not actually been incurred. Aggrieved by the order passed by Assessing Officer, assessee preferred appeal before CIT(A). CIT(A) dismissed the appeal filed by the assessee and disallowed the provision. Aggrieved by the above order, assessee filed appeal before the tribunal. Before tribunal assessee submitted that for Assessment Year 2016-17, the learned CIT(A) as per detailed order dated 12th December, 2019 vide paragraph no. 22 onwards, following the decision of Co-ordinate Bench in DCIT vs. Rajgir Builders (1999) 70 ITD 226 and in Persepolis Construction Co. (P). Ltd. vs. Addl. CIT (2006) 99 TTJ 92 (Mumbai) has held that cost of transferable development rights is an accrued fastened liability and not a contingent liability. Therefore, he submitted that as such claim is allowed to the assessee since 2009-10 it should be allowed. ITAT was of the view that For this year, assessee has claimed a provision of Rs. 9,26,837/- on the basis of percentage of area sold. Therefore, it is apparent that the cost of the TDR is ascertained and liability related to the area sold by the assessee required to be provided, when income offered for taxation. Even otherwise, in percentage completion method the Revenue is recognized based on percentage of work completed and therefore all probable expenditure up to that percentage level are to be recognized as expenditure. Therefore, it directed the Assessing Officer to delete the disallowance Rs. 9,26,837/- on account of TDR. To Read Judgement Download PDF Given Below: