2017 (5) TMI 157 - AT - Income Tax

Tribunal directs reassessment of disallowed TDR amount, emphasizing evidence and fresh assessment

Akruti Steelfab Corporation Versus Dy. Commissioner of Income Tax- Cen Cir 5 (1), Mumbai

The Tribunal allowed the appeal for statistical purposes, directing the Assessing Officer to reconsider the disallowance of the amount written off towards ... Business loss - Disallowance of amount written off towards 380 sq.ft of transferable development rights as the same were not recovered and has become bad - Held that:- The partner in the assessee firm brought these TDR’s into the firm as its capital contribution and was treated as part of stock in trade over the years before being written off during the year. We are not in agreement with the conclusion the first appellate authority on this issue that claim of the assessee remained unsubstantiated. In our considered view the assessee has to be allowed write off of the said TDR when it finally became bad. But finding merit in the arguments of ld.DR that the documents relating to TDR were not before the AO and the matter should be restored back to AO for verification of claim of the assessee on the basis of the said papers. Therefore, it would be in the interest of justice, if the order of the FAA is set aside and the AO is directed to consider the issue of allocation of TDR denovo with fair and reasonable opportunity of hearing to the assessee. Accordingly, we set aside the order of Id. CIT(A) and direct the AO to decide the issue on the basis of material available on record and also evidence as supplied by the assessee in the set aside proceedings and allow the claim of the TDRs were found to be brought in by the partner as capital contribution. - Appeal of the assessee is allowed for statistical purposes. Issues:Appeal against disallowance of amount written off towards transferable development rights.Analysis:The appellant, engaged in the business of builder and property development, filed an appeal against the disallowance of Rs. 12,87,085 written off towards 380 sq.ft of transferable development rights (TDR) for the assessment year 2010-11. The Assessing Officer (AO) disallowed the amount as the TDR was not recovered and had become bad. The AO considered the withholding of TDR as penal in nature and assessed the total income at Rs. 12,10,701 by disallowing the TDR written off. The First Appellate Authority (FAA) upheld the AO's order, stating that the appellant failed to substantiate the claim of business loss arising from the write-off. The appellant contended that the TDR was allocated to another entity and brought into the firm as capital contribution, which was shown as stock in trade before being written off. The appellant argued that the TDR could not be recovered, hence rightfully written off. The appellant requested the allowance of the write-off. The Tribunal found merit in the arguments presented by the appellant's representative and disagreed with the FAA's conclusion. The Tribunal held that the TDR was brought into the firm as capital contribution by a partner and was treated as stock in trade before being written off. However, considering that the documents related to TDR were not before the AO, the Tribunal set aside the FAA's order and directed the AO to reconsider the issue with fair hearing and verification of the claim based on the provided evidence. The Tribunal allowed the appeal for statistical purposes, emphasizing the need for a fresh assessment by the AO based on the available material and evidence supplied by the assessee.This detailed analysis of the judgment highlights the key legal issues, arguments presented by the parties, the reasoning of the authorities involved, and the final decision of the Tribunal, providing a comprehensive understanding of the case.