Loading judgment…
Facts
The appellant entered into a Joint Development Agreement (JDA) for his land, wherein he was to receive 30 flats upon project completion. The Assessing Officer (AO) treated this as a transfer attracting short-term capital gains in the year of the JDA.
Held
The Tribunal held that capital gains are not attracted in the year of entering into the JDA, as ownership rights were not transferred. Following the Bombay High Court's decision in Sadia Shiekh, capital gains are exigible only when the flats are handed over to the appellant.
Key Issues
Whether capital gains are attracted in the year of entering into a Joint Development Agreement (JDA) or only upon the handing over of the constructed property to the owner.
Sections Cited
2(47)(v), 53A, 147, 148, 143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, Mumbai “B” Bench, Mumbai.
Before: Smt. Beena Pillai (JM) & Shri Omkareshwar Chidara (AM)
The main grievance of the appellant in this case is that the Ld. AO is not correct in levying capital gains tax when the land is given to the builder, M/s. B.G. Sovani Associates, for development purposes. In the grounds of appeal before the ITAT, the appellant has stated that there is no transfer of property as per section 53A of the I.T. Act and entire control over the property remains with the appellant.
2. In this case, the appellant has entered into joint development agreement (JDA) in this year and as per the agreement, the developer has agreed that the appellant would be given 30 flats to him on completion of the project. Based on this JDA, the Ld. AO held that short term gain arises in view of section 2(47)(v) r.w.s. 53A of Transfer of Property Act in this year itself. The Ld. CIT(A) agreed with the addition of Ld. AO and confirmed the same.
3. Before the ITAT, the Ld. AR of the appellant has argued as follows :-
2 a) During the year, the appellant has not transferred any ownership rights of his land and entered into a development agreement to construct the flats and hence section 2(47)(v) is not applicable, as he is still the owner of land. b) In similar circumstances, the Ld. CIT(A) has accepted the contention of appellant in his wife’s case, by following the Hon'ble Jurisdictional High Court’s case of Sadia Shiekh (Tax Appeal No. 11&12 of 2013 dated 2.12.2013), where it was held that short term capital gains would not be attracted in the impugned year where only JDA was entered into and capital gains are attracted only when flats are handed over to the appellant. c) The appellant has already paid required taxes in the year in which the flats were handed over to him.
The Ld. DR relied on the orders of lower authorities.
Both sides heard. The Hon'ble Bombay High Court in the case of Sadia Shiekh (supra) has held that the capital gains are exigible only when the flats are handed over to appellant and not when the JDA was entered into because the appellant is still the owner of the land and ownership rights were not transferred to developer in the year of entering into the JDA. Subsequently, this decision was followed by ITAT Mumbai in ACIT Vs. Jawaharlal Agicha (2016) 75 taxmann.com 121 (Mum-Trib). In view of the same, the capital gains are not attracted in this year and hence the addition is deleted.
The appellant’s appeal is allowed. Order pronounced in the open Court on 20/05/2025.