TDR receipts for agreement holder

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This discussion explores the tax treatment of Transfer of Development Rights (TDR) receipts for an agreement holder, referred to as 'X'. 'X' facilitated the TDR process between a landowner and a builder, receiving a portion of the payment. The core questions revolve around whether this income should be treated as capital gains or business income, given 'X' is neither the absolute owner of the land nor the TDR. The conversation touches upon TDS implications and the appropriate income tax return forms (ITR3 vs. ITR4).

Umashankara HB

Umashankara HB (Querist)
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29 November 2024 The party 'X' made sale agreement with land owner, later government acquired land and issued the TDR to owner and such TDR sold to a builder in return builder paid certain amount Land owner and 'X' as the confirming party on the instruction of land owner by deducting TDS under section 194IA for both.

1. How and under what head such income should be treated by Mr. X since he is not the absolute owner of either land or TDR.
2. Since it is purchase cost for the builder he deducted TDS, hence it is considered as capital gain as per the form 26AS, and ITR3 form is selecting for filing. If so, since Mr. X is not the owner of either land or TDR and he has not transferred anything How the capital gain will apply?
3. if it is a business income and comes under 44AD and ITR4 is the applicable form and since there is a TDS us 194IA it is asking for me to declare capital gain.

Please guide us and provide suitable explanation & reference of sections of case laws if any.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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29 November 2024 Whether the sale agreement of land owner and X was registered? What was the amount paid by X to land owner? Whether the possession of land was transferred to X? What was the time period between the two agreements? The TDR which is being sold by X is business for him. You can change the head to PGBP in schedule TDS for the relevant entry..

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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29 November 2024 Sale agreement is there, hence consider it as short term capital gains and file ITR.

Umashankara HB

Umashankara HB (Querist)
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29 November 2024 1. X is not either a builder or owner, He just entered to agreement with land owner that he will work to take TDR rights from the government. It is his business to find such lands and convert it into TDR rights in return land owner instructs builder to pay him part payment.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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29 November 2024 Agreement with land owner is enough and 26AS show for TDS applicable for capital gains, no problem file ITR under capital gains with nil cost.

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