INCOME TAX OFFICER-42(1)(5), BANDRA KURLA COMPLEX vs. THE BORIVALI ASHWINI CO OP HOUSING SOCIETY LIMITED, BORIVALI WEST

This appeal is filed by the Revenue against the order of the Ld. CIT(A), NFAC, Delhi dated 13.10.2025 for A.Y. 2014-15 deleting the addition made by the Assessing Officer on account of long term capital gain arising from redevelopment agreement entered into by the assessee society.

The Assessing Officer further noted that the stamp duty authority had adopted value of Rs.12,77,83,500/- and therefore the same was required to be adopted as deemed full value of consideration under section 50C of the Act. After allowing indexed cost of acquisition, the Assessing Officer computed long term capital gain at Rs.7,17,10,446/- and added the same to the income of the assessee.

Aggrieved, the assessee carried the matter before the Ld. CIT(A). The Ld. CIT(A), after considering the development agreement and judicial precedents including the decision of Hon’ble Supreme Court in the case of Balbir Singh Maini and Seshasayee Steels Pvt. Ltd., held that the development agreement merely granted licence to the developer for redevelopment and there was no transfer of possession contemplated under section 53A of the Transfer of Property Act. The Ld. CIT(A) accordingly held that provisions of section 2(47)(v) were not attracted

The Revenue is in appeal before us and has raised grounds challenging deletion of addition of Rs.7,17,10,446/- and applicability of section 50C.

The Ld. DR strongly relied upon the assessment order. The Ld. DR submitted that the development agreement clearly resulted in transfer of rights in immovable property and therefore amounted to conveyance. It was argued that the society had permitted demolition of the existing structure and had handed over possession to the developer for redevelopment and therefore the ingredients of section 2(47)(v) stood satisfied. The Ld. DR further submitted that once there is transfer of capital asset being land and building, all consequential provisions including section 50C become applicable.

The Ld. DR relied upon the decision of Hon’ble Bombay High Court in the case of Suhas Damodar Sathe vs State of Maharashtra in WP No.8030 of 2017 to contend that development agreement results in transfer of property rights. Reliance was also placed on the decision of Hon’ble Nagpur Bench of Bombay High Court in the case of The Joint Charity Commissioner vs Nagpur Diocesan Trust Association in WP No.4543 of 2010. The Ld. DR accordingly submitted that the Ld. CIT(A) was not justified in deleting the addition.

Per contra, the Ld. AR relied upon the order of the Ld. CIT(A). The Ld. AR submitted that the assessee society had merely granted development rights and permissive access to the developer for redevelopment of the property and there was no transfer of ownership or possession contemplated under section 53A of the Transfer of Property Act. It was submitted that title in the land continued to remain

The Ld. AR relied upon the decision of the Coordinate Bench of the Tribunal in the case of ITO 41(2)(4), Mumbai vs RBI Employee Bhagwati Co-operative Housing Society Ltd. in ITA No.3595/Mum/2025 dated 27.10.2025. Reliance was also placed on the decisions of Mumbai Tribunal in Raj Ratan Palace Co-operative Housing Society Ltd. reported in [2011] 12 taxmann.com 172 and MIG Co-operative Housing Society in ITA No.896/Mum/2016.

We have heard the rival submissions and perused the material available on record. The short controversy before us is whether the redevelopment agreement entered into by the assessee society with the developer results in transfer within the meaning of section 2(47)(v) of the Act so as to attract chargeability of capital gain in the hands of the assessee society.

We find that the Assessing Officer proceeded on the footing that the assessee society had transferred rights in land and building by entering into development agreement and by handing over possession to the developer. However, on careful perusal of the development agreement and facts brought on record, we find that the assessee society continued to retain ownership rights in the property and the developer was merely granted limited development rights for redevelopment of the building.

The Hon’ble Supreme Court in the case of Seshasayee Steels Pvt. Ltd. has held that granting licence to developer to enter upon land for development does not amount to possession contemplated under section 53A of the Transfer of Property Act. The Hon’ble Apex Court has

We find that the Coordinate Bench of the Tribunal in the case of RBI Employee Bhagwati Co-operative Housing Society Ltd. (supra), while considering redevelopment agreement entered into by a co- operative housing society, has held that the consideration received is taxable in the hands of members and not the Appellant society.

Further, in the case of Raj Ratan Palace Co-operative Housing Society Ltd. reported in 12 taxmann.com 172, the Mumbai Bench of the Tribunal held that transfer of development rights by housing society for redevelopment would not give rise to taxable capital gain in absence of cost of acquisition and where no independent transfer of ownership rights in land had taken place. Similar view has been taken by the Coordinate Bench in MIG Co-operative Housing Society.

We further find that the decisions relied upon by the Ld. DR are distinguishable on facts. The decision in the case of Suhas Damodar Sathe vs State of Maharashtra was rendered in the context of property law and interpretation of conveyance under the Maharashtra Stamp Act and not in the context of chargeability of capital gain under section 45 read with section 2(47)(v) of the Income Tax Act. Similarly, the decision in the case of Joint Charity Commissioner vs Nagpur Diocesan Trust Association was rendered in altogether different factual and legal context and does not govern the issue arising in the present appeal.

We therefore find no infirmity in the well reasoned order passed by the Ld. CIT(A) deleting the addition made by the Assessing Officer.

In the result, appeal of the Revenue is dismissed.