No Capital Gain Tax in JDA Execution Year without Consideration & with Limited Possession: ITAT [Read Order]

‘Where no consideration is received and possession is handed over only for limited purpose of development, no capital gains can be said to have accrued in the year of execution of the JDA’, held the Hyderabad Bench of the Income Tax Appellate Tribunal ( ITAT ).

Sahodhar Reddy Muddasani filed an appeal before the appellate tribunal. He filed his income tax return declaring income of ₹5.85 lakh.

After a search and seizure operation, the Assessing Officer issued notice under Section 153A. It was noted that the assessee along with other landowners had entered into a JDA dated 19.01.2016 with M/s Moksha Infracon Pvt. Ltd. (developer) for land measuring 676 sq. yards.

From the developers, the landowners were entitled to receive 1,853 sq. ft. of built-up area. The AO treated the JDA as a “transfer” within the meaning of Section 2(47) and held that capital gains arose in the year of execution, computing and adding ₹3,65,904 as long-term capital gains while completing the assessment.

The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the addition.

Before the Tribunal, the assessee argued that no taxable transfer had taken place in the relevant year. It said that there was no consideration received under the JDA during that period.

The possession was given only to the developer to carry out construction activity, not as possession under Section 53A of the Transfer of Property Act, which is required for attracting Section 2(47)(v), assessee’ s counsel CA C Maheshwar Reddy submitted.

The assessee also pointed out that a co-landowner under the same JDA had already succeeded before the ITAT in a similar matter. Therefore the principle of consistency applies.

Vijay Pal Rao ( Vice President) and Madhusudan Sawdia (Accountant member) noted the ruling of Telangana High Court in Smt. Santha Vidyasagar Annam v. ITO, where it was held that if the possession given by the landowners to the developer was only for the limited purpose of development and that no consideration had been received during the year of execution of the JDA, no taxable capital gains arose under section 45(1) of the Act in that year.

When the revenue opposed the relief, the Tribunal noted that the Department failed to bring any proof to show that the assessee received any monetary or other consideration in the JDA execution year.

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