ORDER
1. 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:
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“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. |
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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. |
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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
Commissioner of Income-tax v.
Balbir Singh Maini [2017] 398 ITR 531 (SC) 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. v. State of Haryana [2012] 340 ITR 1 (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.
