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Facts
The assessee, a company involved in construction, entered into a Joint Development Agreement (JDA) for land in AY 2014-15. The Assessing Officer (AO) treated this JDA as a "transfer" under Section 2(47)(v) and (vi) of the Income Tax Act, assessing long-term capital gains (LTCG) under Section 147. The assessee contended that no actual transfer of possession occurred, but the CIT(A) upheld the AO's order, dismissing the assessee's appeal.
Held
The Tribunal observed that the AO and CIT(A) did not definitively establish the year of transfer, denied indexation benefit despite evidence of purchase deeds, and did not correctly classify the profit from the sale of constructed assets (business income vs. capital gains). Consequently, the Tribunal set aside the CIT(A) order and remanded the matter back to the AO for a fresh determination of the year of transfer, allowance of indexation, cost of acquisition, and appropriate characterization of income.
Key Issues
1. Whether the Joint Development Agreement constituted a "transfer" under Section 2(47)(v) and (vi) for capital gains taxation in the relevant assessment year, including the actual date of transfer and possession. 2. Entitlement to indexation benefit on the cost of land. 3. Proper characterization of income from the sale of constructed property (capital gains vs. business income).
Sections Cited
147, 148, 144B, 2(47)(v), 2(47)(vi), 142(1), 143(2), 250, 53A (Transfer of Property Act, 1882), 58A (Transfer of Property Act, 1882), 17 (Indian Registration Act), 49 (Indian Registration Act)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, KOLKATA ‘A’ BENCH, KOLKATA
Before: SHRI SONJOY SARMA & SHRI RAKESH MISHRA
PER RAKESH MISHRA, ACCOUNTANT MEMBER:
This appeal filed by the assessee is against the order of the Commissioner of Income Tax (Appeals)-NFAC, Delhi [hereinafter referred to as Ld. 'CIT(A)'] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2014-15 dated 04.04.2025, which has been passed against the assessment order u/s 147 r.w.s. 144B of the Act, dated 21.05.2023. 2. The assessee is in appeal before the Tribunal raising the following grounds of appeal:
“1. That the Appeal Order passed u/s 250 of the Income Tax Act, 1961 by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Income Tax Department, is unlawful, unwarranted and against natural justice. I.T.A. No.: 957/KOL/2025 Assessment Year: 2014-15 Crystal Mercantiles Private Limited.
Your Appellant submits that the execution of Joint Development Agreement cannot be equated as a Transfer of Property according to the provisions of section 58A of the Transfer of Property Act, 1882 and so also to attract the provisions of section 2(47)(v) / (vi) of the Income Tax Act, 1961, when no control over the possession of the Land was not given to the Developer by your appellant. Hence, it is prayed to delete the arbitrary addition of Rs.4,51,15,564/- with the declared income of your appellant. [Relief claimed Rs.4,51,15,564/-].
That your appellant craves leave to urge, to add, to alter, to amend, to rescind or to adduce further Grounds of Appeal on or before the date of appeal hearing.”
Brief facts of the case are that the assessee is a company engaged in the business of construction and the original return of income was filed showing ‘NIL’ income. Subsequently, information was received from the DDIT (Inv.) that the assessee, along with other co-owners, had entered into a joint development agreement for transfer of land on 24.05.2013 with M/s. Vedic Reality Pvt. Ltd. as per which the assessee agreed to give possession of his portion of land. Thus, there was transfer of land as per section 2(47)(v) and (vi) of the Act but the assessee did not offer the long term capital gains on the same. The assessment was reopened and notice u/s 148 of the Act was issued as per the extended date of TOLA and subsequently, the Assessing Officer (hereinafter referred to as Ld. 'AO') issued notice u/s 142(1) and 143(2) of the Act and the assessee was asked to explain the joint development agreement with M/s. Vedic Reality Pvt. Ltd. As per the joint development agreement, the assessee transferred his portion of land which comes to 107.65 Shatak, i.e. 7.95% of the total area and the stamp duty value of the property was arrived at ₹4,51,45,564/- which was treated as long term capital gains and the Ld. AO assessed the total income of the assessee u/s 147 r.w.s. 144B of the Act. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A) who went I.T.A. No.: 957/KOL/2025 Assessment Year: 2014-15 Crystal Mercantiles Private Limited. through the statement of facts, the judicial pronouncements relied upon by the assessee and the grounds of appeal. The Ld. CIT(A) examined the facts of the case and held as under: “3(a). I have considered facts & circumstances of the case. I have also considered the assessee's submissions. From the facts of the case, it is seen that the assessee entered into a joint development agreement with M/s. Vedic Reality Pvt. Ltd on 24.05.2013 as per which the assessee along with other co-owners transferred total land admeasuring 1354.69 shatak situated at Mouza Shikharpur, PS Rajarhat, PO-Bagu, Dist - North 24 Parganas, West Bengal in which the assessee's portion was at 107.65 shatak. This development agreement was registered with Additional