HARI NARAYAN GUPTA (HUF),PATNA vs. ITO, WARD- 6 (5), PATNA

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ITA 384/PAT/2024Status: DisposedITAT Patna23 February 2026AY 2011-128 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that no transfer of property had taken place within the meaning of Section 2(47)(v) of the Income Tax Act, 1961. The reasoning was based on the fact that the JDA itself did not involve any other performance of an act by either party, indicating no transfer of rights. The Tribunal noted that a separate agreement for share distribution of the constructed area was executed in FY 2015-16, and the assessee had already offered to tax capital gains arising from the sale/transfer in AY 2016-17. The Tribunal found that the builder was to obtain permissions and that the agreement for share distribution was executed much later. The Tribunal distinguished the facts from the case of Chaturbhuj Dwarkadas Kapadia, where substantial payments were made at the time of agreement. The Tribunal relied on the Patna High Court decision in ACIT Vs. Dr. Mahabir Prasad and the Punjab & Haryana High Court decision in C.S. Atwal Vs. CIT, as affirmed by the Supreme Court, which held that possession delivered under such agreements is as a license, not a transfer. The Tribunal also noted that in a similar case involving Godrej Properties Ltd., the development agreement was annulled and no construction or sale occurred, and no consideration was received or accrued. The Tribunal concluded that the AO's addition on the basis of the Development Agreement was without merit. The AO was directed to delete the capital gains computed. The issue of conversion of land into 'stock-in-trade' was also addressed, with the Tribunal stating that the treatment in books is not the sole factor, but a series of events and circumstances are relevant. The Tribunal found no transfer or gains in the relevant AY.

What were the facts?

The assessee, Shri Hari Narayan Gupta (HUF), is appealing an order dated 30.03.2024 by the National Faceless Appeal Centre, Delhi (Ld. CIT(A)), for Assessment Year 2011-12. The appeal challenges the confirmation of an addition of ₹1,33,85,300/- made by the Assessing Officer (AO) on account of long-term capital gain arising from a property subject to a Joint Development Agreement (JDA) dated 04.08.2010, with M/s Artech Construction Engineering Pvt. Ltd. The assessee had filed its return showing a total income of ₹24,24,260/-. The AO reopened the case under Section 147, alleging that LTCG of ₹1,33,85,300/- had escaped assessment. The JDA stipulated the developer would construct on the assessee's 12598 sq. ft. land, with the assessee receiving 42.5% of the constructed area (13385.3 sq.ft) and the developer 57.5%. The AO considered this a transfer under Section 2(47)(v) and Section 53A of the Transfer of Property Act, attracting capital gains under Sections 45 and 48.

What were the issues?

1. Whether the Tribunal had to decide if a transfer of property had occurred within the meaning of Section 2(47)(v) of the Income Tax Act, 1961, attracting capital gains under Sections 45 and 48, based on the Joint Development Agreement (JDA) dated 04.08.2010. Assessee's contentions: The assessee argued that no transfer of property had taken place within the meaning of Section 2(47)(v) as there was no other performance of any act by either party beyond the agreement itself. The assessee pointed out that a separate agreement for share distribution of constructed area was executed in FY 2015-16, and tax on capital gains arising from the sale/transfer was offered in AY 2016-17. The assessee relied on the Patna High Court decision in ACIT Vs. Dr. Mahabir Prasad and the Punjab & Haryana High Court decision in C.S. Atwal Vs. CIT, upheld by the Supreme Court. Revenue's contentions: The revenue, through the Ld. DR, contended that the date of conversion of land into 'stock-in-trade' should be taken as per the assessee's books (April 2007). The revenue also argued that the assessee had entered into a sham transaction, though this was not the case of the AO or CIT(A). The revenue relied on the Bombay High Court decision in Chaturbhuj Dwarkadas Kapadia.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 53A,Section 2(47)(v),Section 45,Section 48,Section 50C,Section 54F,Section 2(47)(vi)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “PATNA” BENCH, PATNA

Before: SHRI DUVVURU RL REDDY, VP & SHRI RAJESH KUMAR, AM

For Appellant: Shri A.K. Rastogi &
For Respondent: Shri Ashwani Kr. Singal, DR
Hearing: 24.11.2025Pronounced: 23.02.2026

This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 30.03.2024 for the AY 2011-12.

2.

The only issue raised by the assessee is against the confirmation of addition by the ld. CIT (A) of ₹1,33,85,300/- as made by the ld. AO on account of long-term capital gain arising from the property given for the Joint Development Agreement.

3.

The facts in brief are that the assessee is deriving income from business and is a senior citizen. During the year, the assessee filed the return of income on 29.09.2011, showing total income of ₹4,24,260/-. Thereafter, the case of the assessee was reopened u/s 1) Total area of land as per JDA 12,598 SFT 2) Total permitted Super Build Area to be constructed on the land (As 31495 SFT per FAR Provisions) 3) Total number of land owners One 4) Share of this Land Owner in the land Full

5.

After hearing the rival contentions and perusing the materials available on record, we find that the assessee has entered into a Land Development Agreement with the builder as stated hereinabove and builder has been allowed to construct the property under the said development agreement. The assessee was to get 42.50% of the total constructed area and builder share was to be 57.50%. Apart from this, there has been no other performance of any act on the part of the assessee as well as the builder which showed that there was transfer of rights in favour of the builder/ developer. The copy of Joint Development Agreement, is available at page no.3 to 20 of the Paper Book of the assessee. We note that under the said agreement the builder was to obtain the permissions/sanction/ map approval of the area as is apparent from clause 6 of the agreement. We further “Heard the parties in respect of IA No.3221 of 2012. The same has been filed along with Vakalatnama of one Ratan Kumar Tulsi son of the sole respondent Dr. Mahabir Prasad who is said to have died on 16.2.2012. The prayer in the IA is to allow substitution of the three heirs and legal representatives mentioned in paragraph 1 of the IA. In the facts of the case, the prayer for substitution is allowed. Let the three heirs who are wife and sons of deceased Dr. Mahabir Prasad be substituted in his place. Mr Ajay Kumar Rastogi one of the counsels representing Ratan Kumar Tulsi undertakes to file Vakalatnama on behalf of other two heirs also within four weeks. Heard learned counsel for the appellant and learned counsel for the heirs of deceased respondent Dr Mahabir Prasad who has been substituted today. The Tribunal has considered the relevant materials and 2/ 2 has then agreed with the findings of learned CIT (A) that assessee received agriculture land on the death of his father and that land being agricultural land was a source of income for the HUF. The findings are supported by materials on record and do not suffer from any error of law.

31. The contention of the ld. D.R. that assessee has accepted Rs. 13.75 crores from Godrej Properties Ltd. pursuant to the Development Agreement, therefore, it amounts to transfer of the land to Godrej Properties Ltd. does not find any merit. There was no transfer of land as per amended provisions of section 53A of TOPA applicable for the relevant A.Y. 2008-09 under consideration accompanied by fact that there was no transfer of possession to GPL and the possession of land was with assessee only and the same has been expressly statd in clause 6 of Development Agreement. Furthermore the assessee has not received any consideration from Godrej Properties Ltd. but had received only deposit" which was to be adjusted against the sale of villas on completion of the project. It is also a matter of record that Godrej Properties Ltd. has not carried out any construction/development activity as per the project envisaged in Development agreement relied on by A.O. What was mentioned in the Development Agreement was only the value of land to provide benchmark for the purpose of sharing “8. Being aggrieved with the order dated 27th December, 2012, Respondent filed a further appeal to the Tribunal. By the impugned order, the Tribunal held that there was

6.

In the result, the appeal of the assessee is allowed.

Order pronounced in the open court on 23.02.2026.

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