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Facts
The appeal was filed by the legal heirs of the deceased assessee with a delay of 56 days due to various personal circumstances including the age and illiteracy of the widow, and serious illnesses of the deceased and his daughter. The primary issue was whether the capital gains arising from a Development Agreement-cum-GPA were assessable in the hands of the individual assessee or HUF, and whether the agreement constituted a 'transfer' under the Income Tax Act.
Held
The Tribunal condoned the delay in filing the appeal due to sufficient cause. It held that the Development Agreement-cum-GPA, which granted only a license for construction and did not transfer ownership or substantial possession, did not constitute a 'transfer' under Section 2(47)(v) of the Income Tax Act, and therefore, no capital gains tax was leviable.
Key Issues
Whether the delay in filing the appeal is condonable and if the Development Agreement-cum-GPA constitutes a 'transfer' for capital gains tax purposes.
Sections Cited
2(47)(v), 45(1), 54F, 148
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Income Tax Appellate Tribunal, Hyderabad ‘B’ Bench, Hyderabad
Before: SHRI VIJAY PAL RAO & SHRI MADHUSUDAN SAWDIA
आयकर अपील�य अ�धकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘B’ Bench, Hyderabad BEFORE SHRI VIJAY PAL RAO, VICE PRESIDENT AND SHRI MADHUSUDAN SAWDIA, ACCOUNTANT MEMBER आ.अपी.सं /ITA.No.776/Hyd/2025 Assessment Year 2013-2014 Late Ragi Rajesham, The Income Tax Officer, KARIMNAGAR. Ward-2, vs. PIN – 505 001. Telangana. KARIMNAGAR. PAN AAXPR4513J Telangana. (Appellant) (Respondent) िनधा�रती �ारा/Assessee by : Sri RV Nageshwar Sharma, CA राज� व �ारा/Revenue by : Dr. Sachin Kumar, Sr. AR सुनवाई की तारीख/Date of hearing: 10.03.2026 घोषणा की तारीख/Pronouncement: 10.04.2026 आदेश/ORDER PER VIJAY PAL RAO, VICE PRESIDENT :
This appeal by the assessee is directed against the Order dated 06.01.2025 of the learned CIT(A) -National Faceless Appeal Centre [in short “NFAC], Delhi, for the assessment year 2013-2014.
2 ITA.No.776/Hyd./2025 2. There is a delay of 56 days in filing the present appeal. The assessee has filed a petition for condonation of delay. The learned Authorised Representative of the Assessee submitted that the assessee is a widow of about 76 years old and illiterate and therefore, could not understand the procedure for filing the appeal against the Order of the learned CIT(A). The assessee was completely depending on the Tax Advisor for filing of the appeal before the Tribunal. Further, the assessment was in the case of the deceased husband of the assessee who was diagnosed with cancer and undergoing the treatment and thereafter expired on 12.02.2023 due to cancer. The learned Authorised Representative of the Assessee has further submitted that the daughter of the assessee is also diagnosed with cancer. He has thus submitted that the delay in filing the appeal is neither willful nor deliberate but due to the facts and circumstances beyond the control of the assessee.
3. On the other hand, the learned DR has not raised any serious objection for condonation of delay in view of the 3 ITA.No.776/Hyd./2025 fact that the present appeal has been filed by the legal heir of the assessee who died due to cancer.
We have considered the rival submissions and perused the reasons explained by the assessee in the petition for condonation of delay which reads as under:
1. “That the appellants herein being the Legal Heirs of Late Sri Ragi Rajesham have filed the present appeal on 02-05-2025 against the order of the CIT(A), NFAC, dated 06/01/2025 served on the same day.
That there was a delay of 56 days [Fifty Six days) in filing the appeal before this Hon'ble Tribunal. The delay was neither deliberate nor intentional but occurred due to reasons beyond the control of the appellants.
3. That the appellants had filed an affidavit explaining the circumstances leading to the delay. The reasons, inter alia, include: a. The Assessee was diagnosed for cancer and was undergoing treatment by the time the appeal was filed before the CIT(A) against the Orders of the Ld. AO u/s. 148; b. None from the family was aware about the legal course of action were able to provide appropriate time material for the AR to respond during the course of First Appellate proceedings; c. Consequent to the death of the assessee Late Sri Ragi Rajesham, misunderstandings and disputes arose amongst the legal heirs and their family members; 4 ITA.No.776/Hyd./2025 d. The Assessee's widow is aged about 76 years and illiterate to understand the legal issues and need someone to get her to the AR for helping in preparation and submission of the Appeals, both before the CIT(A) and the Hon'ble ITAT. e. Further, the daughter of the late Assessee and one of the signatories herein was also diagnosed for Cancer and even that took some time for the signatories to settle for submission of information. f. That was one more reason why only the wife of the late Assessee was made as a signatory to the Affidavit filed before the Hon'ble Members for condonation of delay.
4. That the appellant has always acted bona fide and diligently pursued the matter. The delay is solely attributable to the circumstances explained above and not due to negligence or inaction.
5. That it is a settled principle of law that substantial justice should prevail over technicalities, and a litigant should not be denied the right of appeal merely on account of delay when sufficient cause is shown.
6. That the appellant craves indulgence of this Hon'ble Tribunal to condone the delay in filing the appeal, in the interest of justice. PRAYER In view of the facts and circumstances stated above, it is most humbly prayed that this Hon'ble Tribunal may kindly be pleased to: a) Condone the delay of 56 days in filing the appeal; and b) Admit the appeal for adjudication on merits; c) Pass such other order(s) as deemed fit in the interest of justice.”
5 ITA.No.776/Hyd./2025 4.1. Accordingly, by considering the reasons as explained by the assessee, we are satisfied that the assessee was having a ‘reasonable cause’ for the delay of 56 days in filing the present appeal before the Tribunal. Accordingly, the delay of 56 days in filing the present appeal is condoned.
The assessee has raised the following grounds of appeal:
1. “On the facts and circumstances of the case, the Order passed by the Ld. AO is bad in law in as much the notice initiating the proceedings were issued on a wrong person. The appellant had raised his contentions on the same but the same were not considered.
2. The Ld. AO erred in facts and in circumstances in as much as the terms of the JDA were very clear in its intent as far as the transfer of rights in the property were agreed to be transferred only at the time of handing over the completely constructed flats.
The Order of the Ld. AO is bad in law, unjust and unwarranted in as much as the provisions of sec. 54F were misunderstood by the Ld. AO as against the legislative intention and also existing judicial pronouncements already placed on record during the assessment proceedings.
4. The Order of the Ld. AO is perverse and bad in law in as much as the AO's erred in denying the benefit of exemption under sec. 54F towards deemed investments in the flats in as much as his observation that the Flats received were sold was not entirely 6 ITA.No.776/Hyd./2025 correct and the same had to be taken possession of, investment towards construction and sold beyond the stipulated period of minimum period of holding for benefit under sec. 54F.
5. The Appellant craves leave to add, alter, amend, delete any of the grounds as aforesaid during the course of Appellate proceedings, and would submit the relevant Judicial decisions relied upon in the written Submissions to follow.”
The learned Authorised Representative of the Assessee has submitted that the assessee is an individual and filed his return of income for the year under consideration declaring total income of Rs.5,21,040/-. Thereafter, the Assessing Officer reopened the assessment by issuing notice u/sec.148 of the Income Tax Act [in short "the Act"], 1961 on 30.06.2021 to assess the capital gain in pursuance to the Development Agreement -cum- Power of Attorney executed on 04.03.2013. He has further contended that since the property in question was an ancestral property belongs to the HUF therefore, the capital gain if at all arising in pursuance to the agreement, cannot be assessed in the hand of the individual assessee. He has referred to the assessment order in the case of HUF for the assessment year 1966-1967 placed at Page no.98 of the paper book and 7 ITA.No.776/Hyd./2025 submitted that the HUF was in existence even in the year 1966-1967. In the computation of income for the assessment year 1979-1980 the HUF has declared the income from agriculture and therefore, it shows that the land in question belongs to the HUF and not to the individual assessee. He has also referred to the Partition Deed dated 06.01.2021 and submitted that there was a partition between the members of the HUF vide Doc. Dated 27-07-2017. However, thereafter there was a sub-partition between the three members of the Mini-HUF vide Partition Deed dated 01.06.2021. Therefore, the learned Authorised Representative of the Assessee has submitted that for the year under consideration the property was owned by the HUF and not by the individual. He has further submitted that even otherwise there is no transfer of immovable property in pursuance to the Development Agreement dated 04.03.2013. He has referred to Clause-10 of the said Development Agreement cum GPA and submitted that owners of the land have granted license to the Developer to enter in the land for the limited purpose of carrying out the construction activity in accordance with the terms and 8 ITA.No.776/Hyd./2025 conditions mentioned in the Development Agreement and therefore, the Development Agreement would not constitute a ‘transfer’ as per the provisions of sec.2(47)(v) of the Act. In support of his contention, he has relied upon the decision of this Tribunal in ITA.No.228/Hyd./2025 dated 08.10.2025 in the case of Shri Srinivas Pampati, Karimnagar & Another vs. ITO, Ward-2, Karimnagar.
On the other hand, the learned DR has submitted that the Assessing Officer has examined these facts and the contention of the assessee that the land belongs to the HUF. However, the Development Agreement cum GPA was not executed by the HUF but the same was executed by the individuals who claimed themselves as the owners of the land in question and therefore, the assessee cannot take a different stand from the claim made in the Development Agreement which is a registered document wherein the assessees have declared themselves as owners of the land in question in their individual capacity and not as HUF. Therefore, the Assessing Officer has rightly assessed the capital gain in the hands of the individual. He has relied upon 9 ITA.No.776/Hyd./2025 the Orders of the authorities below and submitted that even as per the partition no where it is claimed that the land in question belongs to the HUF. He has relied upon the following decisions:
CIT vs. Gillanders Arbuthnot & Co. [1973] 87 ITR 407 (SC); Chaturbhuj Dwarkadas Kapadia of Bombay vs. CIT [2003] 2. 260 ITR 491 (Bom.); 3. CIT vs. Gita Duggal [2013] 357 itr 153 (Del.-HC); 4. ITO vs. C. Atchaiah [1996] 218 ITR 239 (SC); 5. Sumati Dayal vs. CIT [1995] 214 ITR 801 (SC); 7.1. The learned DR submitted that when the assessee has received the payment of Rs.5 lakhs under the said Development Agreement, then this transaction of handing- over the possession of the land in question against the consideration constitute ‘transfer of immovable property’.
We have considered the rival submissions as well as relevant material on record. Thought the assessee has claimed that the land belongs to the HUF however, we find that the legal title and ownership of the land in question vested with the individual members of the family and therefore, even the Deed of Development Agreement cum GPA 10 ITA.No.776/Hyd./2025 was executed and entered into by the individual owners of the land in question and not in the capacity of HUF. Therefore, we do not find any merit in the contention of the assessee that the income arising from the transfer of the immovable property is not assessable in the individual hands. The partition as referred by the learned Authorised Representative of the Assessee was only a division of the land among the joint ownership of the members of the HUF but the HUF was not given the legal right or title over the property so as to transfer the same. Therefore, these internal arrangement between the family members of the assessee for dividing the land among them would not establish the fact that the ownership of the land was vested with the HUF and not with the individual persons. It is also pertinent to note that neither the said transaction was declared nor any income was offered arising out of the sale of the land or constructed area in the hand of the HUF.
So far as the issue of any capital gain arising from the Deed of Development Agreement cum GPA is concerned, it is a matter of record that it is not an agreement to sell the 11 ITA.No.776/Hyd./2025 property in question but it is only an agreement for development of the property as per the terms of the said agreement for dividing the constructed area amongst the owners and the developer. As per Clause-10 of the agreement, the parties agreed as under:
10) That the First Party land owners have granted license to the Second Party to enter the land under development to the Second Party developers for the limited purpose of carrying on the construction activity in accordance with terms, mentioned herein, and the possession of land for all practical and administrative purpose be deemed to have been given only at the time of passing of consideration in the form of built-up area handed over to the landowners i.e., the First Party. However the First Party Land-Owners shall not be entitled to interfere in the construction activity in any manner or obstruct the Second Party developers in connection with the process of construction or in taking any decision, in appointing the employees, labourers, Contractors etc., in execution of the construction work. However the land- owners are at liberty to make inspection of the construction work during the course of the work at all reasonable times and shall not cause any hindrance or obstructions to the construction work.
9.1. Thus, the land owners have given the license to the developer and allowed the possession only for the limited purpose of carrying out the construction activity on the land.
12 ITA.No.776/Hyd./2025 An identical issue has been considered by this Tribunal in the case of Shri Srinivas Pampati, Karimnagar & Another vs. ITO, Ward-2, Karimnagar (supra), in Para nos.7 to 9 as under:
7. We have heard both the parties and perused the material available on record. We have also carefully examined para no.10 of the JDA placed at page no.44 of the paper book, which is to the following effect: “10. That the First Party land owners have granted license to the Second Party to enter the land under development to the Second Party developers for the limited purpose of carrying on the construction activity in accordance with terms mentioned herein, and the possession of land for all practical and administrative purpose be deemed to have been given only at the time of passing of consideration in the form of built up area handed over to the landowners i.e., the First Party. However the First Party Land Owners shall not be entitled to interfere in the construction activity in any manner or obstruct the Second Party developers in connection with the process of construction or in taking any decision, in appointing the employees, labourers, contractors etc., in execution of the construction work. However the land owners are at liberty to make inspection of the construction work during the course of the work at all reasonable times and shall not cause any hindrance or obstructions to the construction work.
13 ITA.No.776/Hyd./2025 8. On perusal of above, it is evident that the developer was permitted to enter the land only for the limited purpose of carrying out construction activity in accordance with the terms of the JDA. It is further stipulated that possession for all practical and legal purposes would be deemed to have been given only upon handing over of the built-up area to the landowners by the developer. The fact that no consideration was received by the assessee during the year under consideration further strengthens the conclusion that there was no transfer in the year within the meaning of section 2(47)(v) of the Act. In such circumstances, the essential conditions of transfer having not been satisfied, there can be no charge of capital gains under section 45(1) of the Act in this assessment year.
9. We also note that during reassessment proceedings, the assessee had submitted photographs showing that the project was still under construction, which substantiates that the transaction was not complete. Therefore, we hold that the addition of Rs.1,71,13,333/- made by the Ld. AO and sustained by the Ld. CIT(A) is unsustainable. The same is directed to be deleted.”
9.2. Clause-10 of JDA in the above said case is identically worded as in the case in hand. Accordingly, in the facts and circumstances of the case and by following the earlier decision of this Tribunal, we hold that the Development Agreement cum Power of Attorney without any consideration would not constitute a transaction of ‘transfer of immovable property’ in question. We further note that 14 ITA.No.776/Hyd./2025 there was no consideration except an interest free deposit of Rs.5 lakhs made by the developer with the land owners as a performance guarantee which was agreed to be refunded after completion of the project and completion certificate taken from the local authority. The relevant Clause-6 of the Development Agreement is relevant on this aspect which reads as under: “6) That, the interest free deposit of Rs 5,00,000/- paid earlier to the first party Land Owners by the Second Party Builder will be treated as an interest free advance deposit to the first party land owners and they agreed to refund the same, after completion of the building by obtaining completion certificate from the commissioner, Municipal Corporation, Karimnagar by the second party developers.” 9.3. Accordingly, in the facts and circumstances of the case, the addition made by the Assessing Officer is not sustainable and the same is deleted. The decisions relied upon by the learned DR will not help the case of the Revenue as they are not applicable in the facts and circumstances of the present case.
In the result, appeal of the Assessee is allowed.