DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2(2), CHENNAI, CHENNAI vs. ARTHI ASSOCIATES PRIVATE LIMITED, CHENNAI

ITA 3002/CHNY/2026Status: DisposedITAT Chennai09 October 2026AY 2022-2322 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the Ld. CIT(A) erred in deleting the addition of Rs. 23,43,86,527/- as Capital Gains. The Tribunal found that the assessee, by virtue of the Agreement for Sale dated 21.03.2020 and the subsequent Power of Attorney (POA) executed on 24.03.2020 in favor of ANPPL, had effectively transferred the "right to possession" and the right to develop the land. This transfer of rights, even without a registered sale deed, constituted a "transfer" under Section 2(47)(v) of the Income Tax Act, 1961, triggering the capital gains tax incidence. The Tribunal reasoned that the assessee exercised complete dominion over the property by enabling the developer to undertake development activities. The Tribunal also noted that the developer's books of accounts reflected a land cost of Rs. 43,43,86,527/-, with the difference of Rs. 23.43 Crores being credited to the assessee's account, indicating a realization of capital gains. The reliance on the MoU was also questioned as it was executed after the search operation. Therefore, the Tribunal set aside the order of the Ld. CIT(A) and restored the order of the Assessing Officer. The issue of the MoU's validity was implicitly decided against the CIT(A)'s reliance on it.

What were the facts?

The Revenue filed an appeal against the order of the Commissioner of Income Tax (Appeals) for Assessment Year 2022-23. The assessee, Arthi Associates Private Limited, is a company engaged in property development. The Assessing Officer (AO) made an addition of Rs. 23,43,86,527/- under the head 'Capital Gains' on the sale of 27.56 acres of land at Seemapuram Village. The assessee and M/s. Ashok Nandavanam Properties Ltd (ANPPL) jointly purchased this land from M/s. Vishnusurya Projects and Infra Pvt Ltd (Vendor) for Rs. 20 crores via an agreement dated 21.03.2020. The agreement also stipulated clearing an outstanding loan of Rs. 5,81,55,563/-. The Vendor executed a Power of Attorney (POA) on 24.03.2020 in favor of ANPPL, granting rights to deal with the land, obtain approvals, market plots, and execute sale deeds.

What were the issues?

1. Whether the deletion of the addition of Rs. 23,43,86,527/- as Capital Gains taxable in the hands of the assessee for AY 2022-23 by the Ld. CIT(A) is erroneous on facts and in law? 2. Whether the assessee, by holding an "Agreement for Sale" and exercising complete dominion over the property, effectively transferred rights under Section 2(47)(v) of the Income Tax Act, 1961, triggering capital gains tax incidence, irrespective of holding registered title? 3. Whether the instruction to the landowner to execute a Power of Attorney (POA) in favor of the developer (ANPPL) constituted a transfer of the "right to possession" and development rights, thereby triggering capital gains tax, as per tax jurisprudence and principles of part performance of a contract? 4. Whether the Ld. CIT(A) erred in not appreciating that the developer's (ANPPL) books of accounts recognized the land cost as Rs. 43,43,86,527/-, with the difference of Rs. 23.43 Crores credited to the assessee's account, indicating a higher value realization? 5. Whether the Ld. CIT(A) erred in relying on a Memorandum of Understanding (MoU) dated 19.04.2023, which was signed after the search operation on 14.02.2023? Assessee's Contentions: The judgment does not record specific contentions made by the assessee in response to the Revenue's grounds of appeal. However, the CIT(A)'s order, which deleted the addition, would have been based on the assessee's submissions before it. Revenue's Contentions: The Revenue argued that the assessee effectively transferred rights under Section 2(47)(v) of the Income Tax Act, 1961, by holding an Agreement for Sale and exercising dominion. They contended that granting a POA to the developer for possession and development rights triggered capital gains. The Revenue also pointed to the developer's books showing a higher land cost credited to the assessee and questioned the reliance on an MoU signed post-search.

Which sections of the Income-tax Act were involved?

Section 2(47)(v),Section 139,Section 143(3),Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, CHENNAI BENCHES,

Before: SHRI INTURI RAMA RAO & SHRI SS VISWANETHRA RAVI

For Respondent: Mr. K Jayaganesh – CIT
Pronounced: 09.10.2026

Heard together (2 matters)

C.O. No.69/CHNY/2026
ITA No.3002/CHNY/2026

Read from the judgment's own cause title. This page is filed under one of them.

PER INTURI RAMA RAO, ACCOUNTANT MEMBER :

This appeal filed by Revenue as well as Cross Application by Assessee are direct

The order continues below.

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