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Facts
The assessee entered into a Land Development Agreement in FY 2012-13 and did not file a return of income. The AO reopened the case and added capital gains of Rs. 64,02,144/- invoking Section 50C of the Act. The CIT(A) dismissed the assessee's appeal.
Held
The Tribunal held that capital gains should be recognized in the financial year the development agreement was executed and registered. The non-consideration of indexation benefit by the lower authorities was noted.
Key Issues
Whether capital gains arising from a land development agreement are taxable in the year of registration and whether indexation benefit was correctly denied.
Sections Cited
48, 55, 234A, 234B, 147, 148, 144, 50C, 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PATNA ‘DB’ BENCH, KOLKATA
Before: SHRI SONJOY SARMA & SHRI RAKESH MISHRA
order
: 18-November-2025 ORDER
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 2013-14 dated 18.11.2024.
The assessee is in appeal before the Tribunal raising the following grounds of appeal: “1. Section 48. Capital gain was wrongly calculated. My sale consideration was Rs. 6060816 while in assessment order it was wrongly calculated as Rs. 6402144.
2. Section 55. I have purchased land in year 1977 for Rs. 9500. However my cost of acquisition should be taken as lower of stamp duty value and ITA No.: 18/PAT/2025 Assessment Year: 2013-14 Lalmuni Devi. FMV as on 01-04-2001, which comes Rs. 3050000. And at the same time indexation was not allowed.
3. Cost of improvement. I incurred Rs. 200000 for sand filling, boundary wall etc. But my cost of improvement amount was completely ignored.
4. Section 234A. I filed my ITR for ay 2013-14 on time. Therefore interest u/s 234A should not be levied.
5. Section 234B. Since there was long term 5 capital loss so interest u/s 234B should not be levied”
3. Brief facts of the case are that the assessee is an individual and had not filed any return of income for the year under consideration despite entering into and registering a Land Development Agreement with House-Con Consultant & Developer during the FY 2012-13 relevant to the AY 2013-14. Therefore, the case was reopened u/s 147 of the Act and a notice u/s 148 of the Act was issued to the appellant. During the reassessment proceedings, the Assessing Officer (“the Ld. AO”) noted that the assessee received an amount of ₹29,40,000/- as part of the Joint Development Agreement and total value of the consideration as per Stamp Duty Value was ₹64,02,144/-. Therefore, the Ld. AO assessed the total income u/s 144 r.w.s. 147 of the Act by making an addition under the head capital gains of Rs.64,02,144/- as per the provisions of section 50C of the Act. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A) who dismissed the appeal as per his findings as under after considering the written submission: “4. During the course of appellate proceedings, the appellant has filed written submissions. All the submissions filed by the appellant have been carefully perused and taken into consideration while disposing the present appeal.
5. The matter has been carefully considered. It could be seen from the facts that in this appeal Ground No. 1 to 4 pertain to the single issue of addition of capital gain of Rs.64,02,144/- by following the provisions of Section 50C of the Act and the same is adjudicated as under:- ITA No.: 18/PAT/2025 Assessment Year: 2013-14 Lalmuni Devi. 5.1. On receipt of information under section 133(6) of the Act in terms of copies of land development agreement, it was found that the assessee entered into and registered a Land Development Agreement with House-Con Construction & Developer during the FY 2012-13 relevant to the AY 2013-14. On perusal of the land development agreement entered into by the assessee on 14/08/2012, it was noted that the assessee and the developer have agreed to the development agreement where full share of 49% of the total land area of 4355.20 Sq.ft owned by the assessee will be constructed upon by the land developer. The share of the constructed building to be owned by the assessee is 5335.12 Sq.ft encompassing total floor area of 10888 Sq.ft. As per land development agreement registered, the total value of land was Rs.60,00,000/- and the value of share owned by the assessee at full share of 49% of land owned by the assessee stands at Rs.29,40,000/-However the assessee did not file any return of income and hence failed to offer capital gain to taxation. Therefore the case was reopened u/s 147 of the Act and notice u/s 148 of the Act was issued to the appellant The assessee did not file any return of income in response to notice issued u/s 148 of the Act. During the assessment proceedings, the AO noted that the appellant received an amount of Rs.29,40,000/- as part of Joint Development Agreement and total value of consideration as per Stamp Duty Value was Rs.64,02,144/- thereby attracting the provisions of section 50C of the Act. Therefore the AO passed the assessment order u/s 144 r.w.s. 147 of the Act by making addition of capital gain of Rs.64,02,144/- as per provisions of section 50C of the Act. 5.2. During the appellate proceedings, the appellant claimed that although the land development agreement was entered into and registered during the FY 2012-13, the actual possession of the property was received from developer only in subsequent years and hence question of capital gain does not arise at all for the year under consideration. It is to be noted here that the capital gains should be recognized in the financial year in which the development agreement was executed and registered. It is observed that the provisions of the Transfer of Property Act, 1882, particularly Section 53A & 54, emphasize that the transfer of immovable property is effective upon the execution of a registered document, even if physical possession is handed over later. It is noted that the registration of the land development agreement in FY 2012-13 established the date of transfer for tax purposes, and the valuation under Section 50C of the Income Tax Act should be applied based on this registered date. In view of the facts discussed above, it is noted that the appellant entered into and registered the joint development agreement during the FY 2012-13 and failed to offer to tax the capital gain arising out of this transaction. Hence I reject the contention of the appellant and confirm the addition of Rs.64,02,144/- on ITA No.: 18/PAT/2025 Assessment Year: 2013-14 Lalmuni Devi. account of capital gain u/s 50C of the Act. Accordingly, Ground No. 1 to 4 are dismissed.