JDA Amendment for sharing consideration: ITAT quashes Revision Order passed without providing Valid Reason [Read Order]

The Ahmedabad bench of the Income Tax Appellate Tribunal ( ITAT ) quashed the revision order passed without providing a valid reason in respect of the amendment in the Joint Development Agreement ( JDA ) for the purpose of sharing consideration.

In this case, the assessee, Rameshlal Bullchand Ambwani, along with his brother, had entered into a joint development agreement with their own company, Gayari Infrastructure Ltd., wherein they were directors and which was engaged in the development of the real estate project, Maitri Shiv Greens, on their own land. Initially, they had entered into a JDA which was subsequently rectified on 14.10.2014.

As per the agreement, the assessee was to receive consideration for the land provided for development. Out of the same, the capital gain was worked out by the assessee at Rs.78,26,866/-, and the entire gain was claimed as exempt under section 54F of the Act. This was denied by the AO.

After passing the assessment order, the PCIT issued a notice under Section 263 of the Income Tax Act 1961. Upon perusal of the assessment order, the PCIT held that the assessment order was erroneous, causing prejudice to the Revenue on account of the under-assessment of income of the assessee since the AO had failed to examine the issue of reduction in the share of each brother out of consideration received on account of JDA.

Aggrieved by the order, the assessee filed before the tribunal. During the adjudication, S.N. Divatia, counsel for the assessee, argued that the assessee had demonstrated to the AO the existence of the original development agreement, which was subsequently rectified, reducing the shares of the assessee therein from 15% to 11%, the genuineness of which JDA was never questioned by the Pr.CIT. Therefore, the assessee's counsel further argued that there was no prejudice to the Revenue on account of reduced shares of the assessee since the reduced share was accounted for by the company, which was a party to the JDA, which in turn had returned the same to tax in its return of income, and therefore, there was no prejudice caused to the Revenue.

Akhilendra Pratap Yadav, Counsel for Revenue, supported the decision of lower authorities. The tribunal, after examining the agreement, observed that the terms of the agreements had been agreed upon by both parties. In the first agreement, the two parties agreed to share the consideration received on sale in the ratio of 15:85 between the assessee and the company, which is a party to JDA. In the rectified agreement, the share of the sale consideration was agreed to in the ratio of 11:89.

Accordingly, all amendments to the JDA were validly done. There is no case made by the Pr.CIT that any of the amendments were not validly done. Therefore, the bench comprising Annapurna Gupta (Accountant Member) & T.R. Senthil Kumar (Judicial Member) held that there is no error in the assessment order in accepting the terms of the rectified development agreement for the purpose of sharing the consideration received in view of the joint development agreement.

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