Sathi Guha Vs ITO (ITAT Kolkata)
The assessee appealed against the order of the Commissioner of Income Tax (Appeals), NFAC, dated 17.01.2025, challenging the addition of ₹7,08,198 as Long Term Capital Gain (LTCG) arising from a Joint Development Agreement (JDA) relating to co-owned land and the addition of ₹1,23,750 under the head “Income from Other Sources.”
The assessment was reopened under Sections 147/148 on the basis of information received from the Directorate of I & CI, Kolkata that the assessee and other co-owners had entered into a registered Joint Development Agreement with M/s Balaji Inc. and had allegedly handed over possession of the land to the developer on 14.08.2013 with 50% allocation to the developer. According to the Assessing Officer, the co-owners had relinquished rights in 50% of the land, giving rise to LTCG in Assessment Year 2014-15. Based on the District Sub-Registrar’s valuation, the Assessing Officer determined that the assessee’s 13.05% share of the property corresponded to ₹7,08,198, which was brought to tax as long-term capital gain. The relocation amount of ₹1,23,750 received by the assessee was assessed as income from other sources, resulting in a total assessed income of ₹8,31,948.
During the assessment proceedings, the assessee contended that Section 2(47)(v) of the Income-tax Act read with Section 53A of the Transfer of Property Act, 1882, was not attracted because there was no transfer of possession in the legal sense. According to the assessee, the developer was merely authorised to construct a residential building on the land and to undertake activities necessary for obtaining approvals. It was also submitted that there was no transfer of ownership through a registered conveyance and that the amount actually received represented reimbursement for relocation expenses. Reliance was placed on judicial decisions, including those of the Supreme Court, to contend that no transfer had taken place.
The Assessing Officer rejected these submissions and held that the registered JDA, coupled with handing over of possession and allocation of 470 sq. ft. out of the total 3,600 sq. ft. area to the assessee, resulted in taxable capital gains. The Commissioner (Appeals) upheld the assessment, observing that construction by the developer necessarily required possession of the land and further held that the decision of the Supreme Court in Balbir Singh Maini was inapplicable since the Joint Development Agreement had not been cancelled.
Before the Tribunal, the assessee reiterated that the JDA merely authorised the developer to undertake construction and obtain approvals and did not amount to a transfer under Section 2(47) read with Section 53A of the Transfer of Property Act. It was submitted that consideration in the form of the constructed area had not been received during the relevant year and that the assessee had offered capital gains in the year in which the share in the constructed property was actually received.
The Department relied upon the orders of the lower authorities, contending that the registered JDA and handing over of possession constituted transfer and that the assessee’s share in the constructed area represented consideration under the agreement.
The Tribunal examined the registered Joint Development Agreement dated 10.08.2012 and noted that it related to Financial Year 2012-13 corresponding to Assessment Year 2013-14. It observed that if mere execution of the JDA were to be treated as a transfer, the transaction would relate to Assessment Year 2013-14 and not Assessment Year 2014-15. On this basis, the Tribunal held that the Assessing Officer was not justified in making the addition in Assessment Year 2014-15.
The Tribunal further observed that the clauses of the JDA only conferred rights upon the developer to construct the building and obtain the necessary approvals. It also recorded the assessee’s submission that capital gains had already been offered in the year in which the incidence of capital gains arose.
Referring to the decisions of the Supreme Court in Suraj Lamp & Industries (P) Ltd. vs. State of Haryana and Balbir Singh Maini, the Tribunal held that there was no transfer within the meaning of Section 2(47)(v) of the Income-tax Act read with Section 53A of the Transfer of Property Act in the impugned assessment year. Accordingly, it held that no Long Term Capital Gain arose during Assessment Year 2014-15 and deleted the addition. The appeal of the assessee was allowed.
Cases Discussed
- Balbir Singh Maini (Supreme Court)
- Suraj Lamp & Industries (P) Ltd. vs. State of Haryana (Supreme Court), [2011] 14 taxmann.com 103 (SC)
- ITAT Hyderabad, (2014) Tax Corp. (L J) 2700
- Allahabad High Court, 2478 Allahabad High Court
FULL TEXT OF THE ORDER OF ITAT KOLKATA
This is an appeal filed by the assessee against the order passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as “the Ld. CIT(A)] dated 17.01.2025, DIN & order No. ITBA/NFAC/S/250/2024-25/1072280884(1) on the following grounds:
1. “For that on the facts and in the circumstances of the case, the Ld. CIT(A) ought to have deleted the addition wrongly made by the Ld. AO amounting to Rs. 7,08,198/- as Long Term Capital Gain on account of the Joint Development Agreement in lieu of co-owned land of the assessee.
2. For that on the facts and in the circumstances of the case, the Ld.CIT(A) was not justified in upholding the action of the Ld.AO in wrongly making an addition of Rs. 1,23,750/- under the head income from Other Sources.
3. That the appellant craves leave to add, alter or delete all or any of the grounds of appeal.”
2. Briefly stated the facts of the case are that the assessee filed return of income on 19.04.2017 declaring ‘Nil’ income after getting notice u/s 147 of the Act. As per the information received from Directorate of I & C, Kolkata that Smt. Sathi Paul along with other co-owners had entered into a Joint Development Agreement (JDA) with M/s Balaji Inc. in which they handed over the possession of the land to the developer on 14.08.2013 with registered JDA with 50% allocation to the developer. It implies that the assessee along with other co-owners had relinquished the rights to the extent of 50% of the land owned by them through signing of the Development Agreement. Hence the incidence of LTCG would arise in the AY 2014-15 on the transaction as the letter submitted before I & CI Kolkata vide letter dated 26.07.2016 clearly stated that they handed over the said land to the developer on 14.08.2013 after receiving developers letter dated 23.07.2013.In that letter transaction parties also stated in that letter that they received total Rs. 7,00,000/- and Smt. Sathi Paul had received Rs. 1,23,750/- at the time of handing over of the possession to the developer on 14.08.2013.
3. As per the DSR, South 24 Parganas, Market Value of the property (at stamp duty rate) Rs. 1,08,53,625/-. Hence, all the co-owners of the land have parted with rights over property having market value of Rs. 54,26,812/- and Smt. Sathi Paul being 13.05% the share holder of the land has parted with rights over property having market value of Rs. 7,08,198/-. In absence of any consideration disclosed by the assessee in the return of income sale consideration is taxable capital gain in the hands of Smt. Swati Paul only Rs. 70,81,981/-. Accordingly, notice u/s 147/148 of the Act was issued to the assessee and assessee filed return on 19.04 .2017 declaring nil income. Accordingly, notice u/s 143(2) of the Act was issued to the assessee, the assessee after examining the details, the assessee has issued show cause notice and assessee furnished reply stating that the long term capital gain does not arise at all, as per provision of section 2(47)(v) of the Act state that will not apply it shows that any transaction involving allowing the possession of an immovable property to be taken it clearly state that the possession of property in any case there was no such transfer of possession at all. Though Development Agreement, the Developer was authorised to empower to construct residential building on the aforesaid and nothing else. It also does not satisfied the condition precedent u/s 53A of the Transfer of Property Act 1882. There must be transferred of immovable property with consideration. It is very much clear that there is no transfer and long term capital gain will not arise there must be transfer of change of ownership with the help of registered document. In this regard, the Hon’ble Supreme Court has also stated that to constitute transfer, there must be a registered document changing the ownership and possession and another reference are (2014) Tax Corp. (L J) 2700 ITAT Hyderabad and 2478 Allahabad High Court. In any case, the assessee has received certain amount i.e. Rs. 79,667/- which reflect as reimbursement for relocation. The submission of the assessee was not accepted by the AO and he observed that from the available information out of 3600 per sq.ft. area involved in the Development Agreement against which handing over of possession on 14.08.2013. Smt. Sathi Paul had received an allocation of 470 Sq.ft. Therefore, LTCG of Sathi Paul would be 470/3600/100 – 70,08,198/- Rs. 54,26,812/- = 7,08,198/- and it was added back into income of the assessee as long term capital gain and re-location amount received by the assessee of Rs. 1,23,750/- was treated as income from other sources. Accordingly, the total income was assessed at Rs. 8,31,948/-.
4. Aggrieved from the above order, the assessee filed appeal before the Ld. CIT(A). During the appellate proceeding, detailed written submissions were made and submitted that the developer was authorised were empowered to construct residential building on the assessee’s land and nothing else. The Ld. CIT(A) observed that without taking possession how the developer can construct building on the said land. Further, the AO noted that the transacting parties vide letter dated 26.07.2016 clearly states that the person of the land owner to the developer on 14.08.2013 after receiving developer letter dated 23.07.2013 and the Ld. CIT(A) observed that the judgment of Hon’ble Apex Court as relied by the assessee in the case of Balbir Singh Maini will not apply because here the JDA was not cancelled and he dismissed the appeal of the assessee.
5. Aggrieved from the above order, the assessee is in appeal before the ITAT.
6. The Ld. Counsel reiterated the submissions made before the lower authorities and submitted that in the impugned assessment year there was no transfer of land the JDA was registered but the assessee did not receive anything, the possession was handed over only for the construction of the building and obtaining necessary approval wherever it is necessary to take permission etc. in favour of the developer, existing consideration is not received it cannot said that there was a transfer and submitted that the Ld. Counsel referred to the clause of JDA from 2.1 to 2.5 and 3.1 to 3.3 and submitted that mere entering into the JDA is not a transfer within the meaning of section 2(47) r.w.s. 53A of the Transfer of Property Act. There was no consideration received in the form of constructed area of 80% and he further submitted that the assessee offered capital gain in the year in which the share was received.
7. On the other hand, the Ld. DR relied on the order of lower authorities and submitted that the JDA is registered, and possession was handed over to the developer and the assessee’s share is 50% which will be received when the construction will be completed as per the terms of the JDA and necessary share has been calculated by the AO, therefore, there is a correct computation of long term capital gain.
8. Considering the rival submissions, it is noticed that the case of the assessee was reopened on the basis of registered JDA dated 08.08.2012 and the assessee share is 50% and the assessee will receive her share after construction of building. The relevant clause referred by the Ld. Counsel only gives right to the developer for construction of building and obtaining necessary approval from the competent authority. On careful going through the registered JDA dated 10.08.2012 the case pertains FY 2012-13 relevant to AY 2013-14. If mere entering into the JDA is considered as transfer in the case on hand, however, the AO has assessed in the AY 2014-15. Therefore, the AO is not justified to make addition in the assessment year 2014-15, therefore the addition made by the Ao is not correct and deleted for the AY 2014-15. During the course of hearing, the Ld. Counsel stated that the assessee has already offered capital gain in the year of incidence of the LTCG. In this case there is no transfer within the meaning of section 2(47)(v) of the Act r.w.s. 53A of the Transfer of Property Act as per the judgment of Hon’ble Apex Court in the case of Suraj Lamp & Industries (P) Ltd. vs. State of Haryana reported in [2011] 14 taxmann.com 103 (SC) and Balbir Singh Maini (supra).
9. On going through the above observation and judgments of Hon’ble Apex Court, the appeal of the assessee there is no LTCG will arise in the impugned assessment year accordingly the addition made is deleted
10. In the result, appeal of the assessee is allowed.
Order pronounced on 06.07.2026.
