Nand Kishore Agarwal Vs ITO (ITAT Hyderabad)
Section 54F Relief Allowed on JDA Properties as Co-Owner Received Deduction on Identical Facts: ITAT
The Income Tax Appellate Tribunal, Hyderabad Bench, directed the Assessing Officer to allow deduction under section 54F in respect of the assessee’s proportionate interest in residential properties received under a joint development agreement (JDA). The Tribunal noted that another co-owner had already been allowed the deduction for his interest in the same jointly allotted properties, while the Revenue had demonstrated no material factual or legal distinction justifying different treatment.
The Tribunal confined its decision to the section 54F claim because the assessee expressly accepted the quantum of capital gains and the year of taxability. It directed computation of the deduction in accordance with the statutory formula.
Facts of the Case
The assessee, Nand Kishore Agarwal, along with seven other co-owners, entered into a Development Agreement-cum-General Power of Attorney with Aarav Constructions.
The agreement concerned development of land measuring 5 acres and 11 guntas at Gandipet Village, Rajendra Nagar Mandal, Ranga Reddy District. Under the arrangement, the landowners were entitled to receive 50% of the total developed area. The order referred to an estimated value of ₹12,68,25,000 in connection with the development.
On examining the assessee’s return, the Assessing Officer found that no income had been offered under the head “Capital gains” arising from the JDA.
Reassessment proceedings were initiated under section 147, and a notice under section 148 was issued on 23 March 2018. After considering the assessee’s submissions, the Assessing Officer computed capital gains attributable to him at ₹79,26,560.
The assessment was completed under section 143(3) read with section 147 on 27 December 2018, determining total income of ₹87,45,980.
Proceedings Before CIT(A)
The assessee challenged the assessment before the CIT(A), National Faceless Appeal Centre, Delhi. The appellate authority dismissed his appeal through an order dated 12 September 2025.
The grounds subsequently raised before the Tribunal covered several aspects, including reopening, the existence of a taxable transfer, computation of consideration, the assessee’s ownership share and entitlement to section 54F deduction.
However, at the hearing, the assessee’s representative narrowed the dispute. He expressly stated that the assessee was not disputing either the amount of capital gains or the assessment year in which they were taxable.
Consequently, the only issue pressed was the denial of section 54F deduction for the residential properties received under the JDA.
Assessee’s Claim Based on Joint Allotment
The assessee’s representative referred to the details of residential properties allotted to the eight co-owners, reproduced in the CIT(A)’s order.
Those details showed that four residential properties were jointly allotted to the assessee and two other co-owners, Vishnu Swaroop and Ashish Kumar.
The representative also relied on the CIT(A)’s order in Ashish Kumar’s case. That order had allowed section 54F deduction against capital gains arising from the same JDA.
The assessee argued that the properties supporting his claim were the same properties in which Ashish Kumar held a joint interest. Denying the corresponding deduction to him on identical material facts was therefore inconsistent.
He requested a direction to the Assessing Officer to allow the deduction. The Departmental Representative relied on the orders of the lower authorities.
Tribunal’s Findings
The Bench, comprising Vice-President Vijay Pal Rao and Accountant Member Madhusudan Sawdia, examined the allotment details and the relevant portions of the appellate order in Ashish Kumar’s case.
It confirmed that the four residential properties had been allotted jointly to the assessee and the two identified co-owners. Accordingly, the assessee’s deduction claim arose from his interest in residential properties received as consideration under the JDA.
The Tribunal also confirmed that Ashish Kumar had received section 54F relief against capital gains from that agreement.
The Revenue did not bring any material distinction concerning the assessee’s entitlement to the Tribunal’s attention.
Different Treatment Required a Distinguishing Basis
The Tribunal recognised that each assessee’s entitlement must be examined in his own assessment. Relief granted to a co-owner does not, by itself, replace that examination.
Nevertheless, where the material facts are the same, a different conclusion requires an identifiable factual or legal basis.
Here, the deduction concerned interests in the same residential properties received under the same development arrangement. The corresponding claim had been denied to the assessee without any material distinction being demonstrated.
The Tribunal therefore accepted that his claim deserved the same treatment.
Decision and Conclusion
The Assessing Officer was directed to allow section 54F deduction for the assessee’s proportionate interest in the residential properties received under the JDA and calculate the amount using the statutory formula.
The appeal was allowed for statistical purposes. The order did not reopen the accepted capital-gains computation or year of taxation. Its relief concerned the deduction alone, based on the common properties, identical material circumstances and absence of a demonstrated distinction from the co-owner’s case.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT HYDERABAD
This appeal is filed by Shri Nand Kishore Agarwal (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) Delhi (“Ld. CIT(A)”) dated12.09.2025 for the A.Y. 2015-16.
2. The assessee has raised the following grounds of appeal:
“1. The order of the First Appellate Authority is not correct either on facts oor in law and in both.
2. The order of the First Appellate Authority is not justified in confirming the action of A.O initiating proceedings under section 147 mof the I.T. Act.
3. The order of the First Appellate Authority is not justified in confirming the addition of Rs.79,26,560/- made by the A.O as capital gain e3ven without allowing any deduction towards cost and deduction under section 54F.
4. The order of the First Appellate Authority is not justified in rejecting the applicant’s contention that there is no transfer of property for the A.Y under consideration. 5. Without prejudice to the above:
a) Both the lower authorities failed to appreciate the scheme of JDA as per which what is transferred is 50% of the land by the land owner’s in consideration of built up area on the land retained by the land owners, and hence the consideration to be computed is either value of land transferred or the value of builtmup area received and not bhoth as considered by A.O and First Appellate Authority.
b) The order of the First Appellate Authority is not justified in rejecting the appellant’s clai9m that what is transferred by appellant is only land and hence out of the total land valued at Rs.4,70,25,000/- by SRO as per Joint Development Agreement the appellant’s share @ 7.64% out of 50% value of land transferred i.e. Rs.17,96,355/- (7.64% 50% of 4,70,25,000/-) should only be considered for computation of capital gains in the hands of the appellant and not as computed by the A.O at 50% of Rs.12,68,25,000/- which included value of proposed construction area also.
c) The order of the First Appellate Authority is not justified in confirming the action of the A.O in consideriung share in 50% of total project value of Rs.12,68,25,000/- as consideratin received by the assessee.
6(a) The order of the First Appellate Authority is not justified in not appreciating the legal position that the appellant is entitled to deduction under section 54F in respect of share of builtup area to be received as per development agreement. (b) The order of the First Appellate Authority failed to appreciate the fact that since the date of joint development agreement is taken as date of transfer of land in the hands of the appellant, the same date shall be considered as reinvestment for deduction under section 54F.
7. The order of the First Appellate Authority is not justified in not accepting the claim of the appellant that his share of land holding is 7.64% and not 1/8th as adopted by the A.O.
8. The appellant prays for leave to add or amend or alter any of the grounds at the time of hearing of appeal”.
3. The brief facts of the case are that the assessee, along with seven other co-owners, entered into a Development Agreement-cum-General Power of Attorney ( “JDA”) with M/s. Aarav Constructions ( “the developer”) for development of the property admeasuring 5 acres and 11 guntas situated at Gandipet Village, Rajendra Nagar Mandal, Ranga Reddy District. Under the JDA, the assessee and the other seven co- owners were entitled to receive 50% of the total developed area, the estimated value of which was determined at Rs. 12,68,25,000/-. On examination of the return of income filed by the assessee, the Assessing Officer (“AO”) observed that the assessee had not offered any income under the head “Capital gains” arising from the JDA. Accordingly, the AO initiated reassessment proceedings under section 147 of the Income-tax Act, 1961 (“the Act”) and issued notice under section 148 of the Act dated 23.03.2018. After considering the submissions of the assessee, the AO computed the capital gains attributable to the assessee at Rs. 79,26,560/- and added the same to the returned income. Accordingly, the AO completed the assessment under section 143(3) read with section 147 of the Act, vide order dated 27.12.2018, assessing the total income at Rs. 87,45,980/-. 4. Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A), who dismissed the appeal of the assessee.
5. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before this Tribunal. At the outset, the Learned Authorized Representative (“Ld. AR”) submitted that the assessee is not disputing either the quantum of capital gains determined by the AO or the year of its taxability. The solitary issue pressed before us is the denial of deduction under section 54F of the Act in respect of the residential properties received by the assessee under the JDA. In this regard, the Ld. AR invited our attention to page no. 37 of the order of the Ld. CIT(A), wherein the details of the residential properties allotted to all eight co-owners have been reproduced. Referring to these details, the Ld. AR submitted that four residential properties were allotted to the assessee jointly with two other co-owners, namely, Mr. Vishnu Swaroop and Mr. Ashish Kumar. He further invited our attention to para nos. 6.1 and 6.2 of the order of the Ld. CIT(A) in the case of Ashish Kumar, wherein deduction under section 54F of the Act was allowed against the capital gains arising from the same JDA. The Ld. AR submitted that, when deduction under section 54F of the Act had been allowed to one of the co-owners in respect of the residential properties received under the same agreement, denial of the corresponding deduction to the assessee on identical material facts was inconsistent. He accordingly prayed that the AO be directed to allow the deduction under section 54F of the Act.
6. Per contra, the Learned Departmental Representative (“Ld. DR”) relied upon the orders of the lower authorities. 7. We have heard the rival submissions and perused the material available on record. Since the assessee has expressly accepted the quantum of capital gains and the year of its taxability, our adjudication is confined to the claim of deduction under section 54F of the Act. We have examined page no. 37 of the order of the Ld. CIT(A), wherein the details of the residential properties allotted to all eight co-owners have been reproduced, the same is reproduced as under:
The following Bungalows/Villas are allotted to the Owners
| Sno | Plot no | Plots in sq.mtrs | Facing | Built-up area | Owner Name |
|---|---|---|---|---|---|
| 1 | 3 | 334.14 | east | 3645 | Owner No. 2 (Mohan Pershad) |
| 2 | 4 | 317.77 | east | 3645 | Owner No. 1 (Rajender Pershad) |
| 3 | 6 | 353.64 | east | 3645 | Owner No. 1 (Rajender Pershad) |
| 4 | 7 | 339.31 | east | 3645 | Owner No. 1 (Rajender Pershad) |
| 5 | 10 | 328.07 | east | 3645 | Owner No. 6 (Nand Kishore), Owner No. 7 (Vishnu Swaroop) & Owner No. 8 (Ashish Kumar) |
| 6 | 11 | 499.78 | west | 4374 | Owner No. 6 (Nand Kishore), Owner No. 7 (Vishnu Swaroop) & Owner No. 8 (Ashish Kumar) |
| 7 | 12 | 396.4 | west | 4374 | Owner No. 6 (Nand Kishore), Owner No. 7 (Vishnu Swaroop) & Owner No. 8 (Ashish Kumar) |
| 8 | 15 | 396.4 | west | 4374 | Owner No. 1 (Rajender Pershad) |
| 9 | 16 | 396.4 | west | 4374 | Owner No. 1 (Rajender Pershad) |
| 10 | 19 | 392.38 | west | 4374 | Owner No. 2 (Mohan Pershad) |
| 11 | 20 | 392.38 | west | 4374 | Owner No. 1 (Rajender Pershad) |
| 12 | 23 | 376.72 | east | 4421 | Owner No. 3 (Vimala Bai), Owner No. 4 (Gopal Kumar) & Owner No. 5 (Kamal Kishore Agarwal) |
| 13 | 24 | 376.72 | east | 4421 | Owner No. 3 (Vimala Bai), Owner No. 4 (Gopal Kumar) & Owner No. 5 (Kamal Kishore Agarwal) |
| 14 | 27 | 376.72 | east | 4421 | Owner No. 1 (Rajender Pershad) |
| 15 | 28 | 376.72 | east | 4421 | Owner No. 6 (Nand Kishore), Owner No. 7 (Vishnu Swaroop) & Owner No. 8 (Ashish Kumar) |
| 16 | 31 | 380.6 | east | 4421 | Owner No. 1 (Rajender Pershad) |
| 17 | 32 | 380.6 | east | 4421 | Owner No. 1 (Rajender Pershad) |
| Total Plot Area | 6409.38 | Built-up Area Total | 70996 |
8. On perusal of the above, we find that four residential properties were allotted to the assessee jointly with Mr. Vishnu Swaroop and Mr. Ashish Kumar. Thus, the assessee’s claim arises from his interest in the residential properties received as consideration under the JDA. We have also examined para nos. 6.1 and 6.2 of the order of the Ld. CIT(A) in the case of Ashish Kumar, which is to the following effect:
6.1 The appellant is an individual assessee and filed his return of income declaring total income of Rs. 5,59,840/-. Thereafter, on the information available with the department that the assessee along with 7 others had entered into a Development Agreement-cum-General Power of Attorney with M/s Aarav Constructions, for the development of the property admeasuring Ac. 5-11 Guntas in Sy. No. 25 and 27 situated at Gandipet Village, Rajendranagar Mandal, Ranga Reddy District. As per the Development Agreement, the developer is entitled to receive 50% share in the total developed area whose estimated value determined was Rs. 12,68,25,000/-. Case was re-opened after obtaining approval from the Authority concerned. During the assessment proceedings, AO noticed from the Development Agreement-cum-General Power of Attorney that the assessee had transferred his 50% share in the proposed developed area to M/s Aarav Constructions. In view of the provisions of section 53A of the Transfer of Property Act 1882 as well as provision of section 2(47) of the IT Act, AO treated the appellant share of Rs. 79,26,560/- as capital gain. The income of the assessee was assessed at Rs. 84,86,400/-.
6.2 The appellant has challenged the addition on two primary grounds: the year of taxability and the entitlement to Section 54F exemption.
(i) Upon careful consideration of the facts on record, the Authority finds as follows:
For a JDA to attract capital gains under Section 2(47)(v) read with Section 53A of the Transfer of Property Act, handing over of absolute possession with immediate right to construct is a prerequisite.
Though the JDA was executed on 30-07-2014 (AY 2015-16), the developer applied for and obtained the necessary building permissions from the Hyderabad Metropolitan Development Authority (HMDA) only during AY 2016-17.
The actual physical construction and development work commenced only after obtaining these approvals in AY 2016-17.
(ii) Following the settled legal position (including the principles laid down by the
Hon’ble Supreme Court in CIT vs. Balbir Singh Maini), a JDA does not result in a transfer under Section 2(47)(v) if the essential attributes of performance (like sanction of plans and commencement of construction) take place in a subsequent year. Therefore, the capital gains, if any, are taxable only in AY 2016-17 and not in AY 2015-16.
(iii) Even assuming arguendo that a deemed transfer occurred, the appellant’s claim for exemption under Section 54F cannot be summarily dismissed:
-
- Under the 50:50 sharing matrix, the owners were entitled to receive 50% of the total share in the developed project (constructed residential units).
- The investment of the land share consideration directly into the construction of residential units qualifies for relief under Section 54F.
- The AO’s denial of this exemption while simultaneously treating the JDA as a taxable transfer is legally untenable and contradictory. The appellant is fully eligible for the benefit of Section 54F against such deemed capital gains.
9. On perusal of the above, we find that the Ld. CIT(A) has allowed deduction under section 54F of the Act in his case against the capital gains arising from the same JDA. The residential properties forming the basis of the present claim are the same properties jointly allotted to the assessee and the aforesaid co-owners. No material distinction concerning the assessee’s entitlement to the deduction has been brought to our notice by the Revenue. Although the entitlement of each assessee to deduction must be considered in his own assessment, a different conclusion on the same material facts requires a distinguishing factual or legal basis. In the present case, deduction under section 54F of the Act has been allowed to Ashish Kumar in respect of his interest in the residential properties received under the same JDA, whereas the corresponding claim of the assessee has been denied without any material distinction being demonstrated before us. In these circumstances, we find merit in the contention of the Ld. AR that the assessee’s claim deserves the same treatment. Accordingly, we direct the AO to allow deduction under section 54F of the Act to the assessee in respect of his proportionate interest in the residential properties received under the JDA and compute the deduction in accordance with the statutory formula.
10. In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the Open Court on 16th October, 2026.
