TaxTMI 
TaxTMI 
2026 (9) TMI 1313
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....ssession of the property is handed over to the developer on 25.02.2010, therefore, further erred in confirming the order of the Assessing Officer wherein capital gains are determined at Rs. 1,92,50,000/- on account of entering into development agreement. 3. The learned Commissioner erred in following the decision of Hon'ble AP High Court in the case of Potla Nageshwar Rao Vs DCIT to confirm the order of the AO, determining the capital gains at Rs. 1,92,50,000/- on account of entering into development agreement without appreciating the fact that the Hon'ble Supreme Court in the case of Seshasai Steels Pvt Ltd Vs ACIT 421 ITR 46 (SC), explained the provisions of section 53A of the IT Act and held, that in the case of entering into development agreement, there is no transfer as provided u/s. 2(47) of the IT Act to attract the capital gains. 4. The learned Commissioner erred in confirming the order of the Assessing Officer, wherein Rs. 17,37,605/-is taxed as long term capital gains on account of entering into development agreement, assuming that there is a transfer of land. 5. The learned Commissioner erred in confirming the order of the Assessing Off....
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....that the assessee, along with twelve other co-owners, had entered into a JDA with the developer on 25.02.2010. Inviting our attention to Clause no. 1 of the JDA placed at page no. 48 of the paper book, he submitted that the possession of the property was handed over to the developer only for the limited purpose of development of the land into flats. He contended that such possession does not amount to a transfer within the meaning of section 2(47) of the Act and, therefore, no capital gains under section 45 of the Act could be brought to tax in the hands of the assessee. The Ld. AR further invited our attention to page no. 3 of the assessment order and submitted that the Ld. AO had erroneously treated the handing over of possession as a transfer falling within the ambit of section 53A of the Transfer of Property Act, 1882, by placing reliance on the decision of the Hon'ble Andhra Pradesh High Court in the case of Potla Nageswara Rao Vs. DCIT in ITTA No. 245 of 2014 dated 09.04.2014. He submitted that the reliance placed by the Ld. AO on the said decision is misplaced, as in that case the Hon'ble High Court had found that the possession handed over was in the nature of possession co....
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....pproved plans, to be sanctioned by the Greater Hyderabad Municipal Corporation." 8. On a perusal of the above, we find that the possession of the property was handed over by the assessee to the developer only for the limited purpose of development of the land into flats. We have also gone through the relevant observations contained at page no. 3 of the assessment order, which is to the following effect: It could be seen from the above said JDA cum GPA which has been annexed as Annexure-1 to this order that the assessee entered into Development Agreement in the financial year 2009-10 relevant to the AY 2010-11 and handed over the possession of the property to the Developer on 25.02.2010. As per the JDA the assessee received non-refundable deposit of Rs. 11,00,000/- in Cash and an extent of 15,400 sq.ft of constructed area in the form of flats towards his share. Therefore, the Long Term Capital Gains on transfer of land,non-refundable deposit in cash of Rs. 11,00,000/- and constructed area admeasuring 15400 Sq.Ft. is chargeable to tax in the hands of the assessee during the previous year relevant to the assessment year under consideration. In this context it may be pertinent to....
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....e parties, yet the contract has not been executed for consideration. A sum of Rs. 2,00,000/- mentioned in paragraph 6 of the development agreement is only the performance guarantee which is refundable. The aforesaid amount of Rs. 2,00,000/- has not been paid by way of consideration of the transaction. The developer has been handed over the possession for the limited purpose of carrying out the development work. Therefore, in pursuance of the development agreement, the possession of the immovable property has not been handed over to the developer as contemplated under Section 53A of the Transfer of the Property Act, 1882. Therefore, the same does not fall within the definition of 'transfer' under Section 2(47) of the Act. 18. Insofar as reliance placed by the learned Senior Standing Counsel for the Revenue in Potla Nageswara Rao vs. Deputy Commissioner of Income Tax (supra) is concerned, the same is an authority for the proposition that element of factual possession and agreement are contemplated as transfer within the meaning of Section 2(47) of the Act. It has further been held that when the transfer is complete, the consideration mentioned in the agreement for sa....
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....he transferee must, in part performance of the contract, have taken possession of the property or any part thereof. Secondly, the transferee must have performed or be willing to perform his part of the agreement. It is only if these two important conditions, among others, are satisfied that the provisions of Section 53A can be said to be attracted on the facts of a given case. On a reading of the agreement to sell dated 15.05.1998, what is clear is that both the parties are entitled to specific performance. (See Clause 14) Clause 16 is crucial, and the expression used in Clause 16 is that the party of the first part hereby gives 'permission' to the party of the second part to start construction on the land. Clause 16 would, therefore, lead to the position that a license was given to another upon the land for the purpose of developing the land into flats and selling the same. Such license cannot be said to be 'possession' within the meaning of Section 53A, which is a legal concept, and which denotes control over the land and not actual physical occupation of the land. This being the case, Section 53A of the T.P. Act cannot possibly be attracted to the fact....