Tribunal Orders Relief on Interest, Deems TDR Sale Taxable as Business Income

The Tribunal directed the Assessing Officer to provide consequential relief in charging interest under sections 234A and 234B. The consideration received from the sale of Transferable Development Rights was deemed taxable as business income. An addition of Rs. 4,00,00,000 as reimbursement of interest-free refundable deposit was upheld as income. Rs. 34,85,870 was disallowed due to lack of furnished details, except for feasibility study expenses. The appeal was admitted for adjudication on merits after verifying tax payments. ITA No. 149/Bang/2014 was partly allowed, ITA No. 150/Bang/2014 was dismissed, and ITA No. 151/Bang/2014 was allowed.

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Issues Involved:
1. Charging of interest under sections 234A and 234B of the Income Tax Act.
2. Taxability of consideration received on the sale of Transferable Development Rights (TDRs).
3. Addition of Rs. 4,00,00,000 as reimbursement of interest-free refundable deposit.
4. Addition of Rs. 34,85,870 due to lack of furnished details.
5. Admission of appeal under section 249(4)(a) of the Income Tax Act due to non-payment of taxes on returned income.

Detailed Analysis:

1. Charging of Interest under Sections 234A and 234B:
The assessee raised grounds related to the charging of interest under sections 234A and 234B of the Income Tax Act for the assessment years 2007-08 and 2009-10. The Tribunal noted that the prayer of the assessee was for consequential relief, and it directed the Assessing Officer (AO) to give consequential relief in the matter of charging interest while giving effect to the Tribunal's order.

2. Taxability of Consideration Received on Sale of TDRs:
The assessee, a company engaged in property development, argued that the consideration received from the sale of TDRs should not be taxable under the provisions of the Income Tax Act as it gives rise to capital gains. The AO, however, treated the difference between the sale value and the cost recorded in the books as business income. The AO's reasoning included the assessee's business activities, the treatment of TDRs in the books, and the fact that the property was acquired and commercially exploited in the normal course of business. The CIT(A) upheld the AO's decision, concluding that the profit from the sale of TDRs was liable to tax as business income. The Tribunal confirmed this view, stating that the TDRs had a direct nexus with the business of the assessee and were rightly considered as business income.

3. Addition of Rs. 4,00,00,000 as Reimbursement of Interest-Free Refundable Deposit:
The AO added Rs. 4,00,00,000 to the income of the assessee, which was reimbursed by M/s. Sobha Developers Ltd. as part of a sub-lease agreement. The assessee contended that this amount was refundable and should not be treated as income. However, the Tribunal found no evidence to support the claim that the amount was refundable and upheld the revenue authorities' decision to treat it as income.

4. Addition of Rs. 34,85,870 Due to Lack of Furnished Details:
The AO disallowed Rs. 34,85,870 out of the expenditure claimed by the assessee due to insufficient evidence. This included Rs. 13,00,000 for payments to unauthorized occupants and slum dwellers, and Rs. 13,90,900 for feasibility study reports. The Tribunal upheld the disallowance of Rs. 13,00,000 due to lack of supporting evidence but allowed the deduction of Rs. 13,90,900 for feasibility study expenses based on the certificate of the CA and other supporting documents.

5. Admission of Appeal under Section 249(4)(a) Due to Non-Payment of Taxes on Returned Income:
For the assessment year 2010-11, the CIT(A) refused to admit the assessee's appeal due to non-payment of taxes on the returned income, invoking section 249(4)(a) of the Income Tax Act. The Tribunal, considering the Karnataka High Court decision in D. Komalakshi v. DCIT, directed the CIT(A) to admit the appeal for adjudication on merits after verifying the payment of taxes, including TDS and subsequent payments made by the assessee.

Conclusion:
- ITA No. 149/Bang/2014 was partly allowed.
- ITA No. 150/Bang/2014 was dismissed.
- ITA No. 151/Bang/2014 was allowed.

The judgment was pronounced in the open court on August 28, 2014.

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