Srinivas Pampati Vs ITO (ITAT Hyderabad)
No Capital Gains Taxable on Mere Execution of Development Agreement Without Transfer of Possession – Section 2(47)(v) Not Attracted: ITAT Hyderabad
Both Assessees were joint landowners of 6,380 sq. yds. of land at Karimnagar. On 02.03.2013, they along with two others entered into a Development Agreement-cum-GPA (JDA) with M/s. Shriyam Infrastructure for construction of a multi-storeyed residential complex.
Under the JDA:
- The total built-up area was 1,28,350 sq. ft.
- Landowners were to receive 32% & developer 68% of the constructed area.
- Stamp Duty Authority valued the JDA at ₹10.26 crore, & each co-owner’s share was taken at ₹1.71 crore.
AO reopened the assessment u/s 147 on the basis that Assessee had not declared any capital gains on this transaction. Since no details of cost or exemption were furnished, AO treated the entire ₹1.71 crore as long-term capital gain, completing reassessment u/s 147 r.w.s. 144B at a total income of ₹1.76 crore (order dated 19.05.2023). CIT(A), NFAC, Delhi upheld the addition ex parte as Assessee did not respond to appeal notices.
Assessee’s Arguments before ITAT
- The JDA conferred only a limited licence to the developer to enter the land for construction purposes; no absolute possession was handed over.
- Clause 10 of the JDA expressly stated that “possession for all practical & administrative purposes shall be deemed to have been given only upon handing over of the built-up area” to the landowners.
- No consideration, monetary or otherwise, was received during the year.
- Hence, the conditions of “transfer” under Section 2(47)(v) read with Section 53A of the Transfer of Property Act were not satisfied.
- Photographs of the property filed before AO showed construction was still in progress.
- Therefore, no taxable capital gains arose during A.Y. 2013–14.
Revenue’s Stand
- Assessees failed to furnish cost & exemption details & were non-cooperative before both AO & CIT(A).
- AO rightly computed capital gains based on the stamp duty valuation.
- However, considering the new legal argument, the DR suggested remand to AO if necessary.
Tribunal’s Observations & Findings
