Case: Rajesh D. Gaikawad v. Income Tax Officer, Ward-14(1), Pune
Court: Income Tax Appellate Tribunal, Pune Bench “SMC”
Coram: Dr. Dipak P. Ripote, Accountant Member and Vinay Bhamore, Judicial Member
Appeal No.: ITA No. 230/PUN/2026
Assessment Year: 2016–17
Date of Decision: 8 July 2026
Result: Assessee’s appeal partly allowed
The Income Tax Appellate Tribunal, Pune Bench, has held that the mere execution and registration of a joint development agreement does not result in a taxable transfer of land where possession and development rights were not actually handed over to the developer during the relevant assessment year.
The dispute arose from a joint development agreement executed by the assessee with Map Developers on 5 February 2016. Based on information available on the Income Tax Department’s INSIGHT portal, reassessment proceedings were initiated for Assessment Year 2016–17. The Assessing Officer treated the agreement as a transfer of the land and computed long-term capital gains of ₹44,66,499.
The assessee contended that the joint development agreement contained a specific condition requiring him to remove several encumbrances from the property, including an MSEB distribution box, electricity lines, water lines and drainage lines, before possession could be handed over to the developer. Since these obstructions were not removed during the relevant assessment year, possession of the land had not been transferred.
The Tribunal examined clause 5 of the joint development agreement and found that possession was contractually required to be handed over only after the identified encumbrances had been removed. It was undisputed that this condition had not been fulfilled during Assessment Year 2016–17.
The Tribunal also noted that the commencement certificate for the project was issued only on 1 January 2020 and that the project was registered under RERA on 14 December 2020. Actual construction, therefore, commenced several years after the execution of the agreement. These facts had been placed before the tax authorities and were neither disproved nor rebutted by the Revenue.
No Transfer Under Section 2(47)
The Tribunal observed that capital gains become chargeable under Section 45 of the Income Tax Act only when there is a transfer of a capital asset within the meaning of Section 2(47).
In the present case, possession of the land was not given to the developer and the assessee had not transferred any enforceable rights in the property during Assessment Year 2016–17. Consequently, the registered joint development agreement, by itself, did not constitute a transfer capable of attracting capital gains tax.
The Tribunal relied upon the Bombay High Court’s decision in Commissioner of Income Tax-9 v. Eastern Ceramics Ltd., where it was held that no transfer could be recognised in the relevant year when possession had not been delivered, construction had not commenced and the commencement certificate was issued in a subsequent year.
Reliance was also placed on the Pune Tribunal’s decision in Balasaheb Popatrao Phadol v. Income Tax Officer, which held that merely permitting a developer to undertake construction, without handing over possession as contemplated under Section 53A of the Transfer of Property Act, does not amount to a transfer under Section 2(47)(v).
Accordingly, the Tribunal held that no transfer of the capital asset had occurred during the relevant assessment year and deleted the long-term capital gains addition of ₹44,66,499.
Credit Card Payments and Investment Addition Deleted
The Assessing Officer had also made additions of ₹2,25,040 and ₹444 in respect of credit card payments and an investment.
The Tribunal found that the assessee had produced evidence demonstrating that the payments were made through banking channels out of disclosed income. As there was no justification for treating these amounts as unexplained, the Assessing Officer was directed to delete both additions.
Delay of 296 Days Condoned
The assessee’s appeal before the Tribunal was filed with a delay of 296 days. After considering the affidavit explaining the delay, the Tribunal found that sufficient cause had been established.
Emphasising that substantial justice should prevail over procedural delay and that an assessee ordinarily gains nothing by filing an appeal belatedly, the Tribunal condoned the delay and decided the substantive grounds on merits.
Decision of the Tribunal
The Tribunal held that:
The joint development agreement did not result in a transfer of land during Assessment Year 2016–17 because possession had not been handed over to the developer.
No capital gains could arise under Section 45 in the absence of a transfer within the meaning of Section 2(47).
The long-term capital gains addition of ₹44,66,499 was liable to be deleted.
The additions of ₹2,25,040 and ₹444 relating to credit card payments and investment were also liable to be deleted.
The grounds challenging the validity of the reassessment notice and the assessment procedure were not argued and were therefore dismissed as unadjudicated. The grounds relating to interest were treated as consequential.
The assessee’s appeal was accordingly partly allowed.
Key Legal Principle
Execution of a joint development agreement does not automatically result in a transfer for capital gains purposes. Where possession and enforceable development rights remain conditional upon fulfilment of contractual obligations, capital gains cannot be taxed merely on the date of registration of the agreement.
