Srinivas Pampati Vs ITO (ITAT Hyderabad)
Both Assessees were joint landowners of 6,380 sq. yds. of land at Karimnagar. On 02.03.2013, they along with two others entered into a Development Agreement-cum-GPA (JDA) with M/s. Shriyam Infrastructure for construction of a multi-storeyed residential complex.
Under the JDA:
- The total built-up area was 1,28,350 sq. ft.
- Landowners were to receive 32% & developer 68% of the constructed area.
- Stamp Duty Authority valued the JDA at ₹10.26 crore, & each co-owner’s share was taken at ₹1.71 crore.
AO reopened the assessment u/s 147 on the basis that Assessee had not declared any capital gains on this transaction. Since no details of cost or exemption were furnished, AO treated the entire ₹1.71 crore as long-term capital gain, completing reassessment u/s 147 r.w.s. 144B at a total income of ₹1.76 crore (order dated 19.05.2023). CIT(A), NFAC, Delhi upheld the addition ex parte as Assessee did not respond to appeal notices.
Assessee’s Arguments before ITAT
- The JDA conferred only a limited licence to the developer to enter the land for construction purposes; no absolute possession was handed over.
- Clause 10 of the JDA expressly stated that “possession for all practical & administrative purposes shall be deemed to have been given only upon handing over of the built-up area” to the landowners.
- No consideration, monetary or otherwise, was received during the year.
- Hence, the conditions of “transfer” under Section 2(47)(v) read with Section 53A of the Transfer of Property Act were not satisfied.
- Photographs of the property filed before AO showed construction was still in progress.
- Therefore, no taxable capital gains arose during A.Y. 2013–14.
Revenue’s Stand
- Assessees failed to furnish cost & exemption details & were non-cooperative before both AO & CIT(A).
- AO rightly computed capital gains based on the stamp duty valuation.
- However, considering the new legal argument, the DR suggested remand to AO if necessary.
Tribunal’s Observations & Findings
Clause 10 of JDA — Limited Possession:
- The JDA clearly stipulates that the developer was allowed entry only for construction, not as owner or transferee.
- “Deemed possession” arises only when the built-up area is handed over to landowners — which had not occurred during the relevant year.
No Consideration or Transfer Completed:
- Assessees did not receive any portion of constructed area or any money during A.Y. 2013–14.
- Photos & records proved the project was still under construction, indicating that no “transfer” within meaning of Section 2(47)(v) had taken place.
Legal Position:
- For “transfer” u/s 2(47)(v), both possession & part-performance of contract are essential.
- In absence of actual transfer of possession or receipt of consideration, Section 45(1) cannot be invoked.
Conclusion:
The basic preconditions of transfer were not met. Hence, the addition of ₹1.71 crore as long-term capital gain made by AO & sustained by CIT(A) is unsustainable.
Key Takeaways
- Execution of JDA by itself does not constitute “transfer” unless possession & consideration are both parted with.
- Limited licence for construction is not equivalent to transfer of ownership or possession under Section 53A.
- Section 2(47)(v) cannot be invoked merely on signing of a development agreement.
- ITAT reaffirms that capital gains arise only when actual possession of land or built-up share is transferred or consideration is received.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
These two appeals are filed by Shri Srinivas Pampati & Shri Hanmandlu Pampati (“the assessees”), feeling aggrieved by the separate orders passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (“Ld. CIT(A)”), dated 04.12.2024 & 05.12.2024 respectively for the A.Y. 2013-14. Since the grounds raised by the assessees are identical, they are heard together and one consolidated order is being passed for the sake of convenience and brevity.
ITA No.229/Hyd/2025
2. The assessee has raised the following grounds of appeal :
3. The brief facts of the case are that, the assessee is an individual who filed his return of income for assessment year 2013–14 on 27.03.2014 declaring total income of Rs.6,14,920/-. On the basis of information available with the Learned Assessing Officer (“Ld. AO”), it was found that during the year under consideration the assessee had not offered capital gains on transfer of immovable property of Rs.1,71,13,333/-. Accordingly, the Ld. AO reopened the case of the assessee under section 147 of the Income Tax Act, 1961 (“the Act”). After passing order under section 148A(d) of the Act, notice under section 148 of the Act was issued to the assessee on 29.07.2022. In response to the said notice, the assessee filed return of income on 29.01.2023 declaring total income of Rs.5,16,650/-. During reassessment proceedings, on the basis of submissions of the assessee, the Ld. AO noticed that the assessee along with three others had entered into a Development Agreement-cum-General Power of Attorney (“JDA”) with M/s. Shriyam Infrastructure(“Developer”) on 02.03.2013. As per the said JDA, the assessee and the other three persons were joint owners of land measuring 6380 sq. yds. on which they agreed to permit the developer for construction of a multi-storeyed residential complex. The JDA provided that the total constructed area would be 1,28,350 sq. ft., out of which the landowners jointly would receive 32% and the developer 68%. The Stamp Duty Authority determined the total value of the JDA at Rs.10,26,80,000/-. Accordingly, on the basis of the valuation done by Stamp Duty Authority, the Ld. AO computed the assessee’s share therein at Rs.1,71,13,333/-. The Ld. AO called for details regarding cost of acquisition as well as claim of exemption under section 54F of the Act from the assessee. However, no details were furnished by the assessee. Consequently, the Ld. AO treated the entire amount of Rs.1,71,13,333/- as long-term capital gain in the hands of the assessee and completed assessment under section 147 read with section 144B of the Act on 19.05.2023 at a total income of Rs.1,76,29,983/-.
4. The assessee carried the matter in appeal before the Ld. CIT(A). However, the assessee remained unresponsive to the notices issued by the Ld. CIT(A). The Ld. CIT(A), therefore, upheld the order of the Ld. AO and dismissed the appeal of the assessee.
5. Aggrieved with the order of the Ld. CIT(A), the assessee is in further appeal before this Tribunal. The Learned Authorised Representative (“Ld. AR”) invited our attention to para no.10 of the JDA placed at page no.44 of the paper book. He submitted that as evident from this para, the landowners had only granted a limited licence to the developer to enter upon the land for the restricted purpose of carrying out construction activity. He pointed out that it is clearly stated that possession of the land shall be deemed to have been delivered only at the time of formal handing over of the built-up area falling to the share of the landowners, and until then, the developer had no rights of absolute possession. It was further contended that during the year under consideration, the absolute possession of land was not handed over to the developer. The Ld. AR also submitted that no consideration had been received by the assessee or the other landowners during the year under consideration from the developer. Therefore, the requirement of “transfer” under section 2(47)(v) of the Act was not satisfied. He also invited our attention to para no. 4.5.1 of the order of the Ld. AO, wherein the Ld. AO has stated that the photographs of the property was also submitted during reassessment proceedings, to show that the flats were still under construction and had not been completed. In view of these facts, he argued that there was no “transfer” within the meaning of section 2(47)(v) of the Act and, therefore, no capital gains could be brought to tax under section 45(1) of the Act in the impugned year. Finally, the Ld. AR prayed that the addition of Rs.1,71,13,333/- sustained by the Ld. CIT(A) be deleted.
6. Per contra, the Learned Departmental Representative (“Ld. DR”) relied on the orders of the lower authorities. He submitted that the assessee had remained largely non-responsive during assessment proceedings, having failed to provide details of cost of acquisition or exemption claimed. He further submitted that even before the Ld. CIT(A), the assessee remained unresponsive and therefore cannot now claim to raise fresh arguments before the Tribunal. The Ld. DR argued that the Ld. AO had rightly computed capital gains based on the stamp duty valuation, and in absence of cooperation from the assessee, the addition was justified. However, considering the legal arguments now raised by the Ld. AR, the Ld. DR submitted that the matter, if required, may be remitted back to the file of the Ld. AO for proper verification.
7. We have heard both the parties and perused the material available on record. We have also carefully examined para no.10 of the JDA placed at page no.44 of the paper book, which is to the following effect :
“ 10. That the First Party land owners have granted license to the Second Party to enter the land under development to the Second Party developers for the limited purpose of carrying on the construction activity in accordance with terms mentioned herein, and the possession of land for all practical and administrative purpose be deemed to have been given only at the time of passing of consideration in the form of built up area handed over to the landowners i.e., the First Party. However the First Party Land Owners shall not be entitled to interfere in the construction activity in any manner or obstruct the Second Party developers in connection with the process of construction or in taking any decision, in appointing the employees, labourers, contractors etc., in execution of the construction work. However the land owners are at liberty to make inspection of the construction work during the course of the work at all reasonable times and shall not cause any hindrance or obstructions to the construction work.”
8. On perusal of above, it is evident that the developer was permitted to enter the land only for the limited purpose of carrying out construction activity in accordance with the terms of the JDA. It is further stipulated that possession for all practical and legal purposes would be deemed to have been given only upon handing over of the built-up area to the landowners by the developer. The fact that no consideration was received by the assessee during the year under consideration further strengthens the conclusion that there was no transfer in the year within the meaning of section 2(47)(v) of the Act. In such circumstances, the essential conditions of transfer having not been satisfied, there can be no charge of capital gains under section 45(1) of the Act in this assessment year.
9. We also note that during reassessment proceedings, the assessee had submitted photographs showing that the project was still under construction, which substantiates that the transaction was not complete. Therefore, we hold that the addition of Rs.1,71,13,333/- made by the Ld. AO and sustained by the Ld. CIT(A) is unsustainable. The same is directed to be deleted.
10. As regards the other issues raised by the Ld. AR regarding the validity of issue of notice under section 148 of the Act and deduction under section 54F of the Act, since we have already allowed the appeal on merits, these issues are kept open and not adjudicated.
11. In the result, the appeal of the assessee is allowed.
ITA No.228/Hyd/2025
12. The assessee has raised the following grounds of appeal :
13. The issues involved in this appeal is identical to the issues involved in the appeal in ITA No.229/Hyd/2025, wherein we have allowed the appeal of the assessee. Therefore, our discussion and findings in ITA No.229/Hyd/2025 are mutatis mutandis applicable to this appeal also. As the appeal of the assessee in ITA No.229/Hyd/2025 has been allowed, this appeal is also allowed.
14. To sum up, both the appeals filed by the assessees are allowed for statistical purposes.
Order pronounced in the open Court on 8th Oct., 2025.
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