M/S. TATIA DEVELOPERS PVT. LTD.,CHENNAI vs. ITO, CHENNAI

अपीलीय अिधकरण, ’सी’ �ायपीठ, चे�ई IN THE INCOME-TAX APPELLATE TRIBUNAL ‘C’ BENCH, CHENNAI �ी एस.एस. िव�ने� रिव, �ाियक सद� एवं �ी एस.आर. रगुनाथॎ◌, लेखा सद� के सम% BEFORE SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER & SHRI S.R. RAGHUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./I.T.A. No. 2983/Chny/2025 िनधा&रण वष&/Assessment Year: 2016-17 M/s. Tatia Developers Pvt Ltd., Vs. Income Tax Officer, 18, Tatia House, Ritherdon Road, Corporate Ward -3(1), Vepery, Chennai – 600 007. Chennai. [PAN: AADCT-3873-A] (अपीलाथ(/Appellant) ()*थ(/Respondent) अपीलाथ( की ओर से / Appellant by : Shri. D. Anand, Advocate )*थ( की ओर से/Respondent by : Shri. Pilli Prem Kumar, Sr.AR

सुनवाई की तारीख/ Date of hearing 29.06.2026 : घोषणा की तारीख /Date of Pronouncement : 31.08.2026 आदेश /O R D E R PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER:

This appeal filed by the assessee is directed against the order dated 18.08.2025 passed by the ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, for the assessment year 2016-17.

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ld.CIT(A) and confirming the addition made by the AO u/s. 43CA of the

Act.

engaged in the business of development of land into plots. The

assessee filed return of income declaring a total income of

Rs.20,08,710/- which was processed u/s. 143(1) of the Act. Thereafter,

on an information that the assessee executed sale deeds to the tune of

Rs.5,30,82,350/-, the AO issued notice u/s. 148 of the Act. In response

to the said notice, the assessee filed return of income declaring the same as disclosed in the original return of income. The AO issued notices u/s.

142(1) of the Act and the assessee filed its submissions. The AO held

the said submissions are not acceptable and added the compound value

of the land transferred by the assessee as determined by the stamp

valuation authority u/s. 43CA of the Act vide its order dated 28.09.2021

passed u/s. 147 r.w.144B of the Act. The ld.CIT(A) confirmed the same. As aggrieved, the assessee is before us.

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appeal is as to whether the ld.CIT(A) erred in confirming the order of AO

in invoking the provisions of section 43CA of the Act. He submits the

entire addition u/s. 43CA of the Act proceeds on the assumption that the

assessee transferred developed plots to Mr. G. Ramji, without receiving

any consideration merely because the registered conveyance deeds

mention the expression “Nil Consideration”. He argued vehemently that

the ld.CIT(A) have proceeded on the erroneous premise that the seven

registered documents executed by the assessee in favour of Mr.G.

Ramji constituted the independent transfers. He argued that the

provisions u/s. 43CA of the Act is not applicable as it only applies whether the owner transfers land held as stock-in-trade for consideration

below the stamp duty value. He argued that the assessee is neither

owner of land nor received any consideration under the above said sale

deeds. He submits that the plots received under the development

arrangement were subsequently sold and the sale proceeds had already

been offered to tax as business income. He argued that the essential conditions for invoking section 43CA of the Act are absent and taking

the stamp duty value of the exchange deeds u/s. 43CA of the Act would

result in double taxation. He submits that the ld.CIT(A) has

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fundamentally misdirected for treating the assessee as a transferor

merely because it executed the conveyance deeds as a power of

attorney holder. He referred to the facts and submits the plots

transferred under the impugned document belongs to the original land

owner and not to the assessee. Further, he argued that the ld.CIT(A)

has also incorrectly proceeded on the assumption that the assessee

received consideration in kind in the form of developed plots which

completely overlooks the assessee’s consistent explanation that the

impugned deeds were not transactions and they were only adjustment

or exchange deeds executed between land owners pursuant to an

earlier memorandum of understanding so that each owner could obtain convenient plot after development. He argued vehemently that the

ld.CIT(A) ought to have determined whether there was any consideration

received by the assessee under the above said deeds before confirming

the order of AO invoking the provisions u/s. 43CA of the Act. Further,

the ld.CIT(A) failed to appreciate that impugned transactions constituted

reciprocal exchanges equivalent land and consequently erred in treating the consideration as Nil, solely because no mandatory consideration

was recorded in the individual deeds.

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the Act must be interpreted in a broader commercial sense, and when

an assessee received immovable property as a business asset,

exercises rights of ownership, sells the same to third parties, an

accounts for the income in its books, it acquires beneficial ownership

and control. He referred to assessee’s accounting treatment and

submits whether the cost of land and development expenditure were

recognised and corresponding sales were reported in the profit and loss

account. He argued vehemently that the assessee has not acted as a

mere intermediary but rather as a beneficiary and active participant in

the transfer and monetization of land parcels. He submits that the assessee was a party to the registered documents which resulted in the

transfer of plots to third party through registered sale deeds and the

consideration received was not in cash but in the form of developed plots

given in exchange. He argued that the said arrangement clearly

constitutes the barter transfer and under the tax laws such a transfer is

a taxable event at the time of exchange, regardless of whether the benefit is received in cash or in kind. He submits that the transfer is

complete on the date of execution of registered deed and the tax liability

u/s. 43CA of the Act arises on the said date, not deferred to the point of

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monetization through resale. Further, he argued that it is a settled legal

principle that two independent and distinct taxable events cannot be

merged to argue against taxation merely because they involve the same

assets. The exchange of plots in the present case in return for

development services rendered is a distinct transaction from the

subsequent resale of the plots received. He argued that the law

mandates recognition of income u/s. 43CA of the Act at the point of

transfer, and even if actual sale consideration is received. He submits

the provisions u/s. 43CA of the Act exists to plug tax leakage in cases of

non-monetary transactions ensuring that the fair market value in the

present case stamp duty value is brought to tax and prayed to dismiss the grounds raised by the assessee.

record. In order to examine the issue with reference to non-applicability

of the Act as contended by the ld.AR deeming provisions u/s. 43CA of

the Act, it is required to examine the Memorandum of Understanding dated 08.12.2014 entered between Mr.S.V. Shriramulu and Mr. G.Ramji.

We find the said Memorandum of Understanding at pages 8 to 12 of the

paper book. Upon perusal of the same, we note that the said

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Memorandum demonstrates that both the parties above had jointly

developed residential layout under the name and style as “Fortune

Residency” and several plots carved out representing joint ownership of

the above said two parties. It is noted that both the parties agreed to

exchange their respective undivided interest so that each would become

the exclusive owner of complete and marketable plots. Further, both the

parties agreed to transfer their respective undivided interest in the plots

specified in Schedules B & C by way of exchange of equivalent lands.

Further, we note, on an examination of Clause 4 at page no.10 of the

paper book, which clearly explains that the parties shall execute mutual

sale deeds in respect of the divided plots without any consideration and

Clause 5 explains that exchange is for equal land, no consideration or

payment is involved, to say, the said arrangement is only to facilitate

better enjoyment of individual plots involving no sale. For better

understanding, we shall look into Schedule C of above said

Memorandum of Understanding at page no.11 of the paper book, which

is reproduced in a tabular form as under showing the details of sale

deeds and their corresponding page nos.

08.12.2014 (page 8-12 of paper book) Sale Deed Survey Plot Total Area Page no in paper book No No. No. Extent owned (Ramji)

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(in by Ramji sq.ft) (in sqft) 1 2947/2015 89/11 355 646 420 26, 27 & 32 (Sc-B) 2 3455/2015 89/11 351 592 565 42, 42 & 48 (Sc-B) 3 3453/2015 89/11 352 538 515 55 & 61 (Sc-B) 4 3546/2015 89/11 260 1932 1,679 68, 69 &74 (Sc-B) 5 4055/2015 89/11 223 1163 998 81, 82 & 87 (Sc-B) 6 5747/2015 89/11 258 2169 1,325 94 & 100 (Sc-B) 7 5748/2015 89/11 359 742 311 108 & 113 (Sc-B) 8 6629/2015 89/11 222 1344 872 121 & 127 (Sc-B) 9 6645/2015 89/11 357 646 194 137 & 143 (Sc-B) 10 7054/2015 89/11 283 646 179 150 & 156 (Sc-B) 11 7476/2015 89/11 358 646 249 163, 164 & 196 (Sc-B) 12 7478/2015 89/11 349 742 411 177, 178 & 183 (Sc-B) 13 9477/2015 90/8 99 2277 2,231 193 & 198 (Sc-B) 14 221/2016 89/11 237 1163 481 205, 206 & 211 (Sc-B) 15 1107/2016 89/11 202 2701 1,205 218 & 224 (Sc-B) 16 986/2015 89/11 239 1344 736 17 1357/2015 89/11 354 646 420 18 1943/2016 89/11 350 742 668 19 1736/2017 89/11 281 742 471 20 3213/2017 89/11 259 1903 1,865 15,795

note Mr. G. Ramji transferred lands in favour of the nominee of Mr. S.V.

Shriramulu, representing the assessee by way of various sale deeds at

pages 26 to 230 of the paper book covering an aggregate extent of

15,795 sq.ft as shown above.

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herein as Power of Attorney transferred lands in Schedule B of above

said MOU, which is tabulated hereunder for better understanding with

reference to sale deeds and corresponding page nos as below:

Sale Deed Executed by S.V.Shriramulu in favour of G.Ramji and extent of Lands Received in terms of Schedule B of MOU dated 08.12.2014 (page 231-346 of paper book) S.No Sale Plot No. Survey No Total Area Page No. Deed No (assessee) extent owned by (in Assessee SqFt) in sq ft 1 290/2016 Part of 90/4B1 & 2,942 (Only Plot 231, 232, 237 5, 7, 6, 90/4B2 No-9) & 245 (item 9) 8, 103, 334 4, 1, 3, 9, 115, 2 2 291/2016 64 & 65 90/4B3, 2,907 2,907 251, 260, 263- 90/4B4, 265 90/5A3, 90/5A4, 90/5B 3 292/2016 77 & 75 90/4B2, 3,197 3,197 270,271, 276 90/5A2, 90/5B 280-281 4 293/2016 Part of 90/4B2, 3,131 3,131 286, 287, 298- 52, 53, 90/4B3, 301 54, 55, 90/4B4 56, 57, 58, 59, 60, 61, 62, 63 5 295/2016 66 90/4B3, 2,083 2,083 306, 307, 313- 90/5A3, 90/5B 314 6 297/2016 78 90/5B, 90/6A 2,002 2,002 319 TO 321, 328-329 7 298/2016 67 90/4B3, 2,141 2,141 334-335, 338, 90/5A3, 90/5B 341-342 15,795

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transferred land in favour of Mr.G. Ramji by executing sale deeds at

page nos. 231 to 346 of the paper book covering an aggregate extent of

15,795 sq.ft. which is as equivalent to land transferred by Mr.G. Ramji

to Mr.S.V. Shriramulu as reflecting in first table above. On further

examination of market value in the said sale deeds, we note that the

market value adopted in each of the said deeds demonstrates that the

lands exchanged were of equivalent value, meaning thereby,

consideration of the sale deed divided by extent of land conveyed in the

sale deed. Further, we find the fair market value/document value

adopted in all the conveyances was uniformly at 1500 per sq.ft which establishes the exchange was affected on an equal value basis without

any understatement or excess consideration. Therefore, we find force

in the arguments of the ld.AR that the conveyances contemplated under

the Memorandum of Understanding were merely instruments for

effecting rearrangement of ownership amongst the original landowners

and did not constitute commercial sales. Further, no monetary consideration was received by the assessee or by the land owners under

these mutual conveyances which were executed solely to implement the

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pre-existing contractual arrangement recorded in the above said

Memorandum of Understanding.

whether AO and ld.CIT(A) erred in invoking the provisions of section

43CA of the Act by erroneously treating the impugned exchange deeds

as transfers without consideration inspite of the admitted fact that the

said transfers were supported by valuable reciprocal consideration in the

form of equivalent land transferred by Mr.G.Ramji pursuant to the

Memorandum of Understanding. In this regard, we find the entire

addition u/s. 43CA of the Act proceeds on the assumption that the assessee transferred developed plots to Mr.G. Ramji without receiving

any consideration as the registered conveyance deeds mentioned in the

expression “Nill Consideration”. We note that the AO and ld.CIT(A) have

proceeded on the erroneous premise that the seven registered

documents executed by the assessee in favour of above said Mr.G.

Ramji bearing document nos. 290 to 293, 295, 297 & 298 constituted the independent transfers liable to be examined in isolation. We find

both the authorities below completely overlooked the corresponding

reciprocal transfers executed by Mr. G. Ramji in favour of the assessee’s

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customer/nominees pursuant to the very same Memorandum of

Understanding and the conveyances were not unilateral transfers but

formed an integral part of a pre-arranged exchange mechanism.

Further, we find assessee also transferred the lands described in

Schedule B of the above said MoU in favour of Mr. G.Ramji, by executing

the sale deeds listed at sl.nos. 20 to 26 in pages 231 to 346 of the paper

book covering an aggregate extent of 51,795 sq.ft. as detailed in

aforementioned paragraphs. We find in reciprocal consideration thereof,

Mr.G. Ramji transferred the lands described in Schedule C of the above

said MoU in favour of the nominees of assessee by executing various

sale deeds listed at sl. nos. 5 to 19 in pages 26 to 230 of the paper book covering an aggregate same extent of 51,795 sq.ft. as detailed in

aforementioned paragraphs.

executed by the assessee in favour of Mr. G.Ramji were not independent

and they were executed strictly in pursuance of above said MoU entered into between the land owners, which contemplated reciprocal

exchanges of equivalent plots to consolidated fragmented ownership

arising upon development of the residential layout. Further,

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correspondingly, Mr. G. Ramji, also executed transfer deeds in favour of

the assessee’s customers/nominees in respect of equivalent plots. We

find every transfer made by the assessee was matched by a

corresponding transfer made by Mr. G. Ramji under the same

contractual arrangements. Therefore, the very foundation of which the

provisions of section 43CA of the Act have been invoked, that the

assessee transferred land without consideration is actually, in our

opinion, not correct. Further, we note once it is accepted that the

impugned transfers were supported by valid and valuable consideration

in the form of reciprocal transfer of equivalent land, the addition made

by the AO which was confirmed by the ld.CIT(A) under the deeming fiction u/s. 43CA of the Act is not justified.

which clearly explains that the said provisions comes into operation only

whether the consideration received or accrued as a result of the transfer

is less than the value adopted or assessed or assessable by the stamp valuation authority. We note that to make the provisions u/s. 43CA of

the Act applicable, there are two conditions i.e. actual consideration

received or accrued and stamp duty value of the property transferred.

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In the present case, we find on an examination of the assessment order,

that the AO has not recorded any finding that the consideration received

by the assessee was less than the stamp duty value of the property

transferred. Therefore, we find force in the arguments of the ld.AR that

before invoking section 43CA of the Act, the AO was required to

ascertain the value of the land received under the exchange and

compare the same with the stamp duty value of the land transferred. In

the aforementioned we held the assessee received consideration equal

in value to the property transferred, whereby, the area reconciliation

statement and the details of the reciprocal exchange clearly establishes

that the guideline value/stamp duty value and fair market value of the lands transferred and the lands received in exchange are identical.

Thus, we find force in the arguments of the ld.AR when there exists no

understatement of consideration, in our opinion, no occasion for invoking

the deeming fiction contemplated in the provisions of section 43CA of

the Act, in our opinion, cannot be invoked as the consideration received

by the assessee is equal to the guideline value, stamp duty value and fair market value of the property transferred, since, there being no

difference between the guideline consideration and the stamp duty

value, the addition made by the AO u/s. 43CA of the Act is deleted and

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the order of the ld.CIT(A) is set aside. Thus, ground nos. 2 to 5 raised by the assessee are allowed.

Order pronounced on 31st August, 2026 at Chennai.

Sd/- Sd/- (S.R. RAGHUNATHA) (S.S. VISWANETHRA RAVI) ACCOUNTANT MEMBER JUDICIAL MEMBER Chennai, Dated: 31.08.2026 JPV आदेश की )ितिलिप अ1ेिषत/Copy to: 1. अपीलाथ(/Appellant, 2.)*थ(/ Respondent, 3. आयकर आयु2/CIT, Chennai/Madurai/Coimbatore/Salem 4. िवभागीय )ितिनिध/DR & 5. गाड& फाईल/GF

PRASANNA Digitally signed by PRASANNA VANI JETTY VANI JETTY Date: 2026.09.01 15:28:19 +05'30'