Development-agreement transfers: possession, deemed consideration, deductible project costs and section 54F verification shaped capital-gains treatment.

Reassessment under section 147 was treated as valid where the assessee did not respond to statutory notices and had not filed a return despite a transaction giving rise to taxable capital gains. In a development-agreement transfer, possession under the original agreement fixed taxability in assessment year 2016-17, and a later supplementary deed was treated as an extension rather than a fresh transfer. For capital gains computation, the deemed consideration was linked to the super built-up area and parking area receivable, while NALA charges and property tax were allowed and 46% of deviation charges was attributed to the assessee. Section 54F relief was left to factual verification of residential-house ownership.

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Issues: (i) Whether reopening of assessment under section 147 was valid; (ii) whether capital gains arising from the development agreement were chargeable in assessment year 2016-17 or 2017-18; (iii) what should be adopted as the deemed sale consideration for the transfer of land to the developer; (iv) whether NALA charges, property tax and deviation charges were allowable deductions in computing capital gains; (v) whether exemption under section 54F was allowable, subject to verification of ownership of more than one residential house.

Issue (i): Whether reopening of assessment under section 147 was valid

Analysis: The assessee did not respond to the statutory notices and had not filed a return for the relevant year despite the transaction giving rise to taxable capital gains. On those facts, the reassessment proceedings were founded on escapement of income and the statutory conditions for reopening were treated as satisfied.

Conclusion: Reopening was held valid and the challenge to the notice and reassessment failed, against the assessee.

Issue (ii): Whether capital gains arising from the development agreement were chargeable in assessment year 2016-17 or 2017-18

Analysis: The original development agreement was executed on 14.03.2016 and possession of the land had already been handed over to the developer under that agreement. The later supplementary deed only added additional extent and did not alter the character of the original transfer arrangement. The later document was treated as an extension of the earlier transaction, not a fresh transfer postponing taxability.

Conclusion: Capital gains were held taxable in assessment year 2016-17, against the assessee.

Issue (iii): What should be adopted as the deemed sale consideration for the transfer of land to the developer

Analysis: The consideration for relinquishment of the land was taken to be the super built-up area and parking area receivable under the development arrangement. On the admitted figures, the Tribunal directed adoption of the construction value of the super built-up area together with parking area as the deemed sale consideration for computing capital gains.

Conclusion: The deemed sale consideration was directed to be recomputed accordingly, in favour of the assessee.

Issue (iv): Whether NALA charges, property tax and deviation charges were allowable deductions in computing capital gains

Analysis: NALA charges were found to be expenditure incurred by the assessee for conversion of land and were allowed as part of cost. Property tax was also allowed, the revenue having not objected to its allowance in remand. Deviation charges were not allowed in full because they related to the entire project and not exclusively to the assessee's share; only 46% was considered attributable to the assessee in line with the agreed sharing ratio.

Conclusion: NALA charges and property tax were allowed, and 46% of the deviation charges were allowed, partly in favour of the assessee.

Issue (v): Whether exemption under section 54F was allowable, subject to verification of ownership of more than one residential house

Analysis: The claim under section 54F required verification of whether the assessee owned more than one residential house on the relevant date. The Tribunal therefore remitted the factual verification to the Assessing Officer and directed allowance of deduction in accordance with law after granting opportunity of hearing.

Conclusion: The claim under section 54F was allowed for statistical purposes, subject to factual verification, in favour of the assessee.

Final Conclusion: The reassessment was sustained, the year of taxability was affirmed as assessment year 2016-17, part of the computation of capital gains was directed to be revised, and the deduction claim under section 54F was sent for verification, resulting in partial relief to the assessee.

Ratio Decidendi: In a development-agreement transfer, possession already handed over under the original agreement fixes the year of taxability, while capital-gains computation must reflect the actual consideration structure and allowable project-related expenditure attributable to the assessee.

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