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Transferable Development Rights(TDR) and its Taxability

Transferable Development Rights(TDR)

Development right(TDR) is fundamentally a right to develop the land for agricultural , residential or commercial use. Essentially, land like any other asset is a bundle of several rights that accrues to it. Several rights one may identify with land are development rights, possession right, cultivation right etc.By transferring the development rights it shall not result into transfer of ownership of the land into but only the right to develop the land.


As per latest decision of tribunal in M/s SUMER CORPORATION Vs THE STATE OF MAHARASHTRA it was held that the appellant has taken up the work of building contract on land taken for development and was to carry on construction under SLR and in pursuance of which, he is to receive TDR as consideration. The present contract is works contract. As per the definition of sale under the section 2(24) the word ‘other valuable consideration’ would include anything that would directly or indirectly fetch some element of money or any other consideration. In the present case, TDR which is mentioned as Transfer Development Rights can be converted into money and therefore TDR would be a valuable consideration.The contention of the appellant that the transaction is barter or free of cost or without consideration cannot be accepted. The argument of the appellant that there was no measurement for calculation of tax cannot be accepted in view of changed circumstance, wherein State has amended rule 58. However penalty was set aside and the case was decided in favour of revenue.

Quantum of tax – The authority to obtain the value of the entire contract on the basis of the value of the tenements that would have fetched as on the date of the agreement in that locality. Thereafter, to apply rule 58 for determining the value of the goods at the time of transfer of property in the goods whether as goods or in some other form which was involved in the execution of the works contract in that year from 20/06/2006 to 31/03/2007 and to levy tax only on the goods used in the works contract

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