Sahodhar Reddy Muddasani Vs DCIT (ITAT Hyderabad)
No Capital Gains on JDA Without Consideration or Transfer of Possession: ITAT Hyderabad Deletes Addition u/s 45
The Hyderabad Bench of the ITAT deleted the addition of ₹3.65 lakh made towards long-term capital gains, holding that mere execution of a Joint Development Agreement (JDA) does not give rise to a taxable transfer unless consideration is received or possession is handed over in the manner contemplated under law.
The assessee, along with other co-owners, had entered into a JDA with a developer. The Assessing Officer treated the execution of the JDA as a “transfer” under Section 2(47) and taxed capital gains under Section 45(1) in the year of agreement. The CIT(A) confirmed the addition by relying on the Andhra Pradesh High Court decision in Potla Nageswara Rao.
Before the Tribunal, the assessee contended that no consideration was received in the year of JDA and possession, if any, was handed over only for limited development purposes and not under Section 53A of the Transfer of Property Act. Reliance was placed on the Telangana High Court ruling in Smt. Santha Vidyasagar Annam and on an identical decision of the Tribunal in the case of a co-owner arising from the same JDA.
The Tribunal held that, in the absence of receipt of consideration and in the absence of transfer of possession as contemplated under Section 53A, no “transfer” could be said to have taken place under Section 2(47). Following the binding Telangana High Court judgment and the principle of consistency, the Tribunal ruled that no taxable capital gains arose in the year of execution of the JDA.
Accordingly, the addition made under Section 45(1) was deleted and the assessee’s appeal was allowed.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
