VINOD YADAV,PATNA vs. ITO, WARD- 6 (3), PATNA

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ITA 398/PAT/2025Status: DisposedITAT Patna23 February 2026AY 2014-158 pages
AI SummaryPartly Allowed

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 Act. The reasoning was that the LDA primarily allowed the builder to construct, with the assessee to receive 50% of the constructed area. Crucially, the builder obtained permissions for construction only on 08.08.2018, which was after the relevant assessment year. The Tribunal found no other act indicating a transfer of rights. The ratio is that a development agreement where possession is not transferred and construction permissions are obtained post-assessment year does not constitute a transfer for capital gains purposes. The Tribunal relied on the Patna High Court decision in ACIT Vs. Dr. Mahabir Prasad, the Punjab & Haryana High Court decision in C.S. Atwal Vs. CIT (upheld by the Supreme Court), and the co-ordinate bench decision in Fardeen Khan vs. ACIT (affirmed by the Bombay High Court). Consequently, the addition of ₹3,50,79,350 as long-term capital gain was deleted. Regarding the second issue, the Tribunal held that the amount of ₹5,00,000 for demolition was not received by the assessee during the impugned financial year. Possession of the land was handed over on 08.09.2018, after obtaining construction permissions. Therefore, this amount could not be brought to tax in AY 2014-15 and was restored to the AO for fresh adjudication in the year of receipt/demolition. Ground No. 2 was allowed, and Ground No. 4 was allowed for statistical purposes.

What were the facts?

The assessee, Vinod Yadav, filed his return of income for Assessment Year 2014-15 declaring an income of ₹2,62,090. The case was reopened under Section 147 of the Income Tax Act, 1961, due to the omission of long-term capital gain of ₹3,50,79,350 arising from a Land Development Agreement (LDA) dated 07.08.2013. The LDA was entered into with M/s Budha Homes and Developers for the assessee's land measuring 21,279.60 sq. ft. The agreement stipulated that the developer would construct on the land, and the assessee would receive 50% of the total constructed area. The Assessing Officer (AO) computed the capital gain based on the estimated construction cost and the value of consideration as per the LDA, treating it as a transfer under Section 2(47)(ii) & (v) of the Act. The Commissioner of Income Tax (Appeals) [CIT(A)] confirmed the addition. The appeal is against the CIT(A)'s order dated 22.08.2025.

What were the issues?

1. Whether the Tribunal had to decide if the Land Development Agreement (LDA) dated 07.08.2013 constituted a 'transfer' of property within the meaning of Section 2(47) of the Income Tax Act, 1961, thereby giving rise to long-term capital gains taxable under Sections 45 and 48 of the Act, for AY 2014-15. Assessee's contentions: The assessee argued that no transfer of rights had occurred under the LDA, as possession was not transferred and the builder was merely allowed to construct. 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, and a co-ordinate bench decision in Fardeen Khan vs. ACIT. Revenue's contentions: The revenue, through the AO and confirmed by the CIT(A), contended that the LDA amounted to a transfer of property, giving rise to capital gains. The CIT(A) relied on the Bombay High Court decision in Chaturbhuj Dwarkadas Kapadia vs. CIT. 2. Whether an amount of ₹5,00,000, payable by the builder for the demolition of the house, was taxable in AY 2014-15.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 53A,Section 2(47)(ii),Section 2(47)(v),Section 45,Section 48,Section 133(6),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 Mahendra Chowdhary, AR
For Respondent: Shri Ashwani Kr. Singal, DR
Hearing: 26.11.2025Pronounced: 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 22.08.2025 for the AY 2014-15.

2.

The issue raised by the assessee in ground of no. 2 is against the confirmation of addition of the ld. CIT (A) of ₹3,50,79,350/- as made by the ld. AO on account of long-term capital gain arising from the property given for the Joint Development Agreement.

2.1. The facts in brief are that the assessee is deriving income from pension from Bihar Vidhan Sabha and interest from SB account with bank and FDR. The assessee filed its return of income on 01.08.2014, declaring total income of ₹ 2,62,090/-. Thereafter, the case of the 1) Total area of land as per JDA 21280 sq. ft 2) Total permitted Super Build Area to be constructed on the land (As 53,199 sq. ft per FAR Provisions) 3) Total number of land owners 1 4) Share of this Land Owner in the land 21280 sq. ft 5) Tota measurement of super build area under the ownership of the 265599.5 sq. ft land owner (on 50:50 basis with land owner & Builder) 6) Estimated cost of construction of Super Build Area (including ₹3,45,79,350/- parking area) @ square feet X ₹1300/- 2.2. 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 50% of the total constructed area and builder share was to be 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.1 to 27 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 the agreement which were granted on 08.08.2018. Considering all these facts, we are of the view that no transfer of any property had taken place within the meaning of Section 2(47)(v) of the Act and therefore, accordingly, no capital gain has “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. The other issue relating to exemption under Section 54F of the Income Tax Act has been decided by the Tribunal after considering the relevant fact that the assessing officer had also charged capital gain in the year 1999- 2000 and hence, there would not be any scope to hold that the transfer of land had taken place in 1991 as claimed by the Department. The nature of development agreement has been properly appreciated by the Tribunal for rejecting the contention of the Department regarding transfer having taken place in 1991. Since both the material issues have been decided by the Tribunal as per law, we find no substantial question of law for determination in this appeal. It is accordingly dismissed.” Similar ratio has been laid down in the case of C.S. Atwal Vs. CIT reported in 378 ITR 244 (P&H). In the said decision the Hon'ble court held that possession delivered, if at all, was as a license for the development of property and not in the capacity of a transferee. The said decision of the Hon'ble Punjab and Haryana High Court has been “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 profits and adjustment of deposit of Rs. 13.75 crores paid by Godrej Properties Ltd. It is also a matter of record that neither a single villa was constructed nor sold pursuant to the Development Agreement. It is also a matter of record that Development Agreement which is relied upon by the A.O. for the purpose of arriving at the conclusion that asseassee has earned capital gains has been annulled in the year 2011. Accordingly, we do not find any merit in the action of A.O. making addition on the basis of Development Agreement.

32.

Now coming to the argument of the ld. D.R. that date of conversion of land into 'stock-in-trade' should be taken as per the books of the assessee i.e. April, 2007. As per our considered view, the treatment given in the books of account is not a sole factor to determine the year in which land was converted into 'stock-in-trade' but series of events undertaken, facts and circumstances of the case which are very much relevant while considering the year in which "capital asset" is converted into "stock-in-trade". Thus Development Agreement has to be harmoniously construed with reference to the related facts and circumstances of the case. Before reaching to the conclusion, we cannot forget the fact that the ownership and possession of land were always retained with the assessee and the same has been expressly stated so in clause 6 of the Development Agreement. The assessee has not received any consideration from Godrej Properties Ltd. nor was there any assurance about profit given by the Godrej Properties Ltd. in the project, the project had not materialized and ultimately Development Agreement was “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 no transfer within the meaning of Section 2(47)(v) of the Act. This was for the reason of an amendment made in 2001 to the Indian Registration Act, wherein a transfer for the purposes of Section 53A of the Transfer of Property Act, would not take effect, unless, such an agreement is registered. Admittedly, the Development Agreement dated 20th April, 2007 is not a registered document. It further held that the decision of this Court in Chaturbhaj Dwarkadas Kapadia of Bombay case (supra), would have no application to the present facts in view of the change in law with regard to part performance w.e.f. 2001 onwards. So far as Section 2(47) (vi) of the Act is concerned, the impugned order held that there was no transfer in terms of Section 2(47)(vi) of the Act, as it is evident from the Development Agreement dated 20th April, 2007 which provides that there has been no grant of possession of the land to M/s. Godrej Properties Ltd., for the purposes of Sections 2(47)(v) and (vi) of the Act. Further, M/s. Godrej Properties Ltd., did not have exclusive possession of the land but had only permitted user/ license to the land from the Respondent. The impugned order further records the fact that no development activities was carried on the land owned by the Assessee and in view of the market conditions, it was found that the project was not viable and a second Development Agreement was entered into between the parties which was later on revised by Supplemental Agreement dated 27th July, 2012. Thus, the Development Agreement dated 20th April, 2007 was annulled.

2.4. Considering the facts of the assessee in the light of the above decision, we are inclined to set aside the order of ld. CIT (A) direct the ld. AO to delete the addition. The ground no. 2 is allowed.

3.

The ground no. 3 is without prejudice to ground no. 2. Since we have allowed the ground no. 2 in favour of the assessee , therefore the issue in ground no. 3 needs no adjudication.

3.1. The issue raised in ground no. 4 is against the confirmation of addition of 5,00,000/- by CIT(A) as made by the AO made by the AO on the ground that the builder was to pay to the assessee Rs. 5,00,000/- for demolition of the house.

3.2. After hearing the rival contentions and perusing the material on records we note that the said amount has not been received by the assessee during the impugned financial year. We note that even the land was handed over in 08.09.2018 to the builder after the builder obtained the permission to construct the building. The learned CIT(A) added the amount on the ground that the assessee was entitled for the said amount under LDA. In our opinion the amount cannot be brought to tax during the impugned year and has to be taxed in the year of receipt/demolition of the building. Consequently, we restore

4.

In the result, the appeal of the assessee is partly allowed for statistical purposes.

Order pronounced in the open court on 23.02.2026.

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