The tax payer instead of developing the land, transferred the development rights in respect of part of the land to a separate construction company. As per the agreement, the tax payer jointly with the trust was required to convey the land to the proposed buyers. Instead of developing land, the tax payer parted with the development rights in respect of part of the land forever. The possession of the land had also been given during the year along with development rights.
This was an independent activity having no connection with the development of the remaining part of the land. The tax payer was following mercantile system of accounting as per which income accrues when it becomes due for payment. In the instant case, the entire amount become due to the taxpayer in the relevant year on signing of development agreement and on handing over of the possession of the land. Under the mercantile system of accounting the accrual of income does not depend upon receipt of income. Therefore, the income had accrued during the year since the transfer was complete during the year. The postponement of payment does not stop accrual of income.
Therefore, even if part of the payments were received in subsequent years, the entire income had accrued during the year. However, the Tribunal allowed the deduction in respect of cost of acquisition of development right.
The Bombay High Court, while hearing petitions seeking to legalise illegal structures in various parts of the city, has ruled that Regularization of unauthorized constructions will have to be permitted on a case-to-case basis and should not be granted as a matter of course.
A division bench of the High Court held that the planning authority had to consider various factors such as infrastructure, congestion, water supply, and roads before regularizing illegal constructions against payment of a penalty. If there is an increasing pressure and burden on the existing facilities and amenities then the whole system would collapse resulting in large-scale inconvenience, it was observed.
The cases before the Hon'ble Court pertained to regularization of various structures in Bandra, Goregaon, Boriveli, and Pydhonie apart from the top 17 floors of Gaurav Gagan, a 24-storeyed building in Kandiveli (West).
The Hon'ble High Court further ruled that it cannot be said as a matter of general rule that unauthorized constructions must be regularized if the floor space index (FSI) is available or can be generated in the form of transfer of development rights (TDR) from other sources by the builder. Although section 53(1) of the Maharashtra Regional Town Planning Act provides for regularization of unauthorized structures, the indiscriminate regularization through TDR or FSI can have disastrous consequences. Before the authorities take any decision about regularization they must not only consider the alleged hardship to individual flat purchasers but also the interest of those living in the neighbourhood and the public at large.
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