October 1, 2023

The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) has held that no capital gain can be computed in the hands of the assessee (landowner) on the ground that only permissive possession was allocated to the developer under the  Joint Development Agreement (JDA).
During the relevant year, the assessee along with other co-owners has entered into Joint Development Agreement (JDA) on 30.3.2009 with a developer. The assessee’s share in that was 12.5%. The Assessing Officer took the view that the assessee is liable to capital gain tax.
The assessee contended before the authorities that he has not handed over the possession of the property as per the joint development agreement.
The Tribunal bench comprising Accountant Member Mr. B R Bhaskaran and Judicial Member Ms. Beena Pillai observed that an identical issue was considered by the coordinate bench in the case of Anugraha Shelters Pvt. Ltd. (supra), wherein it was held that there is a difference between permissive possession and legal possession.
“In the case of permissive possession, the developer enters the scheduled property on behalf of the owner and not in the independent capacity of the purchaser of the property,” it said.
While granting relief to the assessee, the Tribunal held that “in the instant case also we have noticed that the assessee has given only permissive possession and not legal possession. Accordingly, following the above-said decision of the coordinate bench, we hold that the transfer has not taken place during the year under consideration. Accordingly, the capital gain is not assessable in the hands of the assessee during the year under consideration. We order accordingly.”
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