ITAT – Sale of TDR Rights and Capital Gains

 Order dated 14.8.2026 of the ITAT Bangalore Benches, Bangalore Bench A in ITA NO.1917 / BANG/2025 of Kamlesh Pukhraj Talera  Vs.   Deputy Commissioner of Income Tax

In this case, there was addition of LTCG on sale of TDR amounting to Rs.6,01,53,500/-.

The question was whether the sale of TDR is capital asset and capital receipt is exempt from tax.

The owner had received TDR rights in exchange of land surrendered by him.   Thereafter, he had sold the said TDR rights for Rs.6.01 crores.

The assessee claimed tax exemption on the ground that the TDR rights have no ascertainable cost of acquisition, it is not capital gains and is not chargeable to income tax.

Where TDR is received against surrender of the land, its cost is treated as the cost of the TDR.   Subsequent sale of TDR rights attracts capital gains/

Further When the TDR is subsequently transferred, the question of “no cost of acquisition” being the entire basis of the judicial precedents relied up on before us does not arise. The assessee has paid a price for the TDR, namely, the land surrendered. The cost of the TDR is the cost of the land so surrendered (or such portion thereof as is attributable to it). Accordingly, the computation mechanism under Sections 45 and 48 of the Act is fully operable, and the capital gains on subsequent sale of TDR must be computed by deducting from the sale consideration the cost of the TDR being the value of the land given up. Thus, where TDR is received against surrender of a portion of land, the cost of the land surrendered is the cost of the TDR, and transfer of TDR would accordingly give rise to capital gains i.e. LTCG or STCG depending on the holding period of the land. Thus, in this case the cost is not merely difficult to determine but it is ascertainable with reasonable precision as it is the cost of the land surrendered (proportionately, if only a part of the land was given up).

we confirm the orders of the ld. lower authorities taxing the sale consideration of a TDR as capital gain. Though the assessee has not made any plea for granting the cost of land as the cost of acquisition of TDR, In the interest of justice, we direct the learned Assessing Officer to compute the capital gains on the sale consideration of ₹60,153,500 from transferable development rights after reducing the cost of acquisition attributable to the land exchanged, as discussed above in terms of Section 48(ii) of the Act.