Karnataka High Court Upholds Deletion of LTCG Additions on JDA Land

PCIT Vs Bileshivale Muddanna Govardhana Murthy (Karnataka High Court)

JDA BY ITSELF DOES NOT ESTABLISH “TRANSFER” WHEN ASSESSEE NEITHER RECEIVES THE LAND ON PARTITION NOR PARTS WITH HIS OWN SHARE — KARNATAKA HIGH COURT

The Karnataka High Court upheld the deletion of long-term capital-gains additions arising from an alleged transfer of ancestral lands under a Joint Development Agreement. The subsequent final decree in the family partition proceedings demonstrated that the land covered by the alleged JDA had fallen to the share of other family members and not to the assessee. The assessee continued to hold the lands allotted to him. The Tribunal’s finding that no capital asset belonging to the assessee had been transferred was factual, supported by evidence and not perverse.

Facts

A search under section 132 was conducted in the case of the assessee on 1 October 2013 in connection with the Telecom Employees Co-operative Housing Society Ltd. Group. Notice under section 153A was subsequently issued on 5 November 2014. The assessee requested that his original return be treated as the return filed in response to the notice.

While completing the assessment for AY 2013-14, the AO made the following additions:

• ₹79,61,430 as long-term capital gains relating to 14.5 guntas of land in Survey No. 69/2 situated at Bileshivale Village, Bidarahalli Hobli, Bengaluru East Taluk;
• ₹17,51,16,294 as long-term capital gains relating to 7 acres and 31.5 guntas of land held by the assessee and his family members in different survey numbers; and
• ₹7,75,000 by treating the agricultural income disclosed by the assessee as income from other sources.

The capital-gains additions were based on certain agreements, including a JDA. According to the AO, the developer had been granted possession and extensive rights to enter upon, develop, market and sell the property. The arrangement therefore constituted a “transfer” under section 2(47), particularly section 2(47)(v), read with section 53A of the Transfer of Property Act, 1882.