Capital gains under joint development agreements arise on possession and execution, not a later allocation arrangement.

Delay in filing the first appeal was condoned on reasonable cause after the assessee showed it was abroad when the assessment order was served. On merits, long-term capital gains from the joint development agreement were treated as arising when the agreement was executed and possession was handed over to the developer. Applying section 2(47)(v) of the Income-tax Act read with section 53A of the Transfer of Property Act, the later allocation arrangement was held not to postpone taxability. The gains were therefore taxable in assessment year 2007-08, not 2014-15, and the additions for the impugned year were deleted.

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Issues: (i) whether the delay in filing the appeal before the first appellate authority was liable to be condoned on the basis of reasonable cause; (ii) whether long-term capital gains arising from the joint development agreement dated 27.06.2006 were taxable in the assessment year 2014-15 or in the assessment year 2007-08.

Issue (i): Whether the delay in filing the appeal before the first appellate authority was liable to be condoned on the basis of reasonable cause.

Analysis: The explanation that the assessee was abroad when the assessment order was served was accepted as a reasonable cause. The delay was held to be covered by the statutory concept of reasonable cause, and the appeal was treated as maintainable for adjudication.

Conclusion: The delay was condoned in favour of the assessee.

Issue (ii): Whether long-term capital gains arising from the joint development agreement dated 27.06.2006 were taxable in the assessment year 2014-15 or in the assessment year 2007-08.

Analysis: The transfer was held to have taken place when the joint development agreement was executed and physical possession of the land was handed over to the developer. The Tribunal followed its earlier co-ordinate bench decisions on identical facts and held that the later allocation agreement dated 10.07.2013 did not postpone the incidence of tax. The effect of transfer under section 2(47)(v) of the Income-tax Act, 1961, read with section 53A of the Transfer of Property Act, 1882, was applied, and the argument based on the subsequent sharing arrangement was rejected.

Conclusion: The capital gains were held taxable in assessment year 2007-08 and not in assessment year 2014-15, in favour of the assessee.

Final Conclusion: The additions made on account of long-term capital gains for the impugned assessment year were deleted, and the appeal succeeded on merits.

Ratio Decidendi: In a joint development agreement, where possession is handed over to the developer, the transfer for capital gains purposes occurs on that date under section 2(47)(v) of the Income-tax Act, 1961 read with section 53A of the Transfer of Property Act, 1882, and a later allocation agreement does not shift the year of taxability.

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