Mere execution of JDA with developer does not trigger capital gains tax in real estate transactions

 Recently Bangalore ITAT recently delivered an important ruling clarifying that merely executing a Joint Development Agreement (JDA) does not automatically constitute a "transfer" for capital gains tax purposes. The Tribunal held that for transfer provisions to apply, there must be a conclusive transfer of possession meeting all requirements of the Transfer of Property Act (‘TOPA’) - not merely contractual arrangements that remain contingent.

The assessee and his family jointly owned ancestral land in Bangalore. In September and December 2012, they entered into JDAs with a developer for construction of residential projects. The family also executed an irrevocable General Power of Attorney (GPoA) granting the developer extensive powers and received substantial advances through banking channels. The Assessing Officer computed LTCG, treating the JDA execution coupled with the GPoA and advance payments as a "transfer" under Income Tax Act read with the provisions of the TOPA. The CIT(A) upheld this addition, holding that the family had effectively transferred possession and control of the land to the developer.
The Tribunal deleted the entire addition, making several crucial technical observations - Section 53A of TOPA requirements not satisfied as for transfer provisions to apply, possession must be transferred "in part performance of a contract" under Section 53A. This requires: (a) transferee put in actual possession, (b) contract capable of specific performance, and (c) transferor debarred from denying the contract. These conditions were not conclusively met. The Tribunal also observed that the ownership rights of the land remained disputed as following the JDA execution, family disputes arose and a partition suit was filed. The Civil Court's decree in 2018 allotted substantial portions of the property to other family members, not the assessee. This proved that underlying ownership was never settled when the JDA was executed. If possession had truly been transferred under Section 53A, family members would have been legally debarred from filing partition suits - yet they successfully did so.
A completely new JDA was executed in August 2023 between the developer and the assessee's brother (excluding the assessee). This wasn't a renewal but a fresh arrangement between different parties, proving conclusively that the 2012 JDA never achieved completion. If the 2012 JDA had resulted in effective transfer under Section 53A, no fresh agreement would have been necessary.

Delhi ITAT allows write-off of obsolete inventory under AS-2

 The Delhi ITAT held that write-off of slow-moving and non-moving inventory is allowable as deduction where the inventory had lost utility or become obsolete and the write-off was undertaken in accordance with Accounting Standard-2 (‘AS-2’) supported by technical evaluation and documentary evidence. The Tribunal observed that such write-off reflects the true and correct value of inventory.

Mumbai ITAT clarifies: Capital gains exemption under Section 54F cannot be restricted by intra-head capital loss adjustment

 Recently, in a significant taxpayer-friendly ruling, the Hon’ble Mumbai ITAT, in the case of Nikesh Bhagwandas Mehta vs. ITO, has clarified an important issue concerning the interplay between capital gains exemption under section 54F and set-off/carry forward of long-term capital loss under the provisions of the Income-tax Act, 1961 (‘the Act’). The ruling reaffirms that where the conditions of section 54F are duly satisfied, the exemption is to be granted on the entire eligible long-term capital gain, and the assessee cannot be compelled to first adjust long-term capital losses before claiming such exemption.

In the present case, the assessee, an individual taxpayer, had earned long-term capital gains (LTCG) of approximately Rs. 69.84 lakhs from sale of certain equity shares during AY 2022-23. Since the net sale consideration was duly invested in a qualifying residential house property, the assessee claimed full exemption under section 54F on the aforesaid capital gains. During the same year, the assessee had also incurred long-term capital loss (LTCL) of approximately Rs. 37.72 lakhs on sale of another set of equity shares, which was claimed to be carried forward to subsequent years in accordance with the provisions of the Act.

However, while processing the return under section 143(1), the CPC denied the carry forward of such LTCL. In first appeal, the Ld. CIT(A) upheld the CPC’s action and held that the provisions relating to set-off/carry forward of losses under the Act, require the long-term capital loss to be first adjusted against the long-term capital gains earned during the year, and only the net capital gains remaining thereafter would qualify for exemption under section 54F. Accordingly, the Ld. CIT(A) restricted the exemption under section 54F to the net gain and denied the carry forward of LTCL.

Aggrieved by the aforesaid action, the assessee preferred an appeal before the Hon’ble Mumbai ITAT. After examining the statutory scheme and the interplay between the exemption available under section 54F and the provisions governing set-off and carry forward of capital losses, the Hon’ble Tribunal ruled in favour of the assessee and made the following important observations:

ITAT Chandigarh holds leasehold rights cannot to be equated with freehold property for share valuation

 In a recent ruling, the Chandigarh Tribunal held that leasehold rights in land cannot be regarded as “immovable property” for the purposes of valuation of unquoted shares and such rights cannot be equated with freehold property while determining fair market value.

TAX DUE DATE - MAY 2026.

 

Sr No	Due Date	Related to	Compliance to be made
1.	11.05.2026	GST	Filing of GSTR1 for the month of April 2026
2.	13.05.2026	GST	ISD Return

3.	20.05.2026	GST	Payment of GST for the month of April 2026 Filing of GSTR 3B for the month of April 2026
4.	7.05.2026	TDS/TCS (Income Tax)	Deposit TDS for payments of Salary, Interest, Commission or Brokerage, Rent, Professional fee, payment to Contractors, etc. during the month of April 2026. · Deposit TDS from Salaries deducted during the month of April 2026 • Deposit TCS for collections made under section 206C including sale of scrap during the month of April 2026, if any
5	31.05.2026	TDS/TCS (Income Tax)	Furnish quarterly statement of tax deducted at source (TDS) and tax collected at source (TCS) for the quarter ended Jan-March 2026 in Form 24Q / 26Q / 27Q / 27EQ.
6	31.05.2026	Income Tax	Filing of Annual Information Return u/s 285BA(Old Act).

Income from Other Sources – Assessing Section 56(2)(x) to Off-Market Transfers of Quoted Shares

1. Introduction

The taxation of gifts under the Gift Tax Act, 1958 was abolished in 1998. To prevent routing of unaccounted money through bogus gifts, the Finance Act, 2004 introduced provisions that eventually consolidated into Section 56(2)(x) of the Income Tax Act, 1961 via the Finance Act, 2017. This section taxes receipt of money or property without consideration, or for inadequate consideration below Fair Market Value (FMV), where the excess exceeds ₹50,000. FMV is determined under Rule 11U and 11UA.

The provision is an anti-abuse measure, as confirmed by CBDT Circulars and the Finance Minister’s speech. However, it operates as a deeming fiction – taxing notional income. A critical question arises: does Section 56(2)(x) apply where listed shares are transferred off‑market at a price below the exchange‑listed value?

When a Subsidiary Becomes a Permanent Establishment of Its Foreign Parent

 A subsidiary company is not automatically a Permanent Establishment (PE) of its foreign parent under tax treaties. However, depending on the functions it performs, it can cross the threshold and become a PE under Article 5 of the OECD/UN Model Convention.

India Overhauls Corporate Compliance: Key Amendments to Companies Act & LLP Act

 In a landmark move following the Deloitte Haskins & Sells LLP v. Union of India (Feb 2025) case, the National Financial Reporting Authority (NFRA) has been granted corporate status and significantly expanded enforcement powers. The Delhi High Court’s validation of NFRA’s authority to investigate and penalize auditors for misconduct has been codified. NFRA can now issue advisories, censure, mandate additional training, and refer matters for further action. Professional misconduct now explicitly includes contravention of the CA 2013 provisions, with penalties ranging from fines and imprisonment to debarment.

Calcutta High Court clarifies inclusion of electricity duty in valuation of captive power for tax deduction purposes

 Recently, the Hon’ble Calcutta High Court in Graphite India Ltd. v. Commissioner of Income-tax ruled in favour of the taxpayer and put to rest the controversy regarding valuation of captively consumed electricity for tax deduction purposes. The Hon’ble Court clarified that while electricity duty may not be separately payable on power consumed internally, the same would nevertheless form part of the market value of power when computing the eligible deduction on captive power undertakings.

Bombay HC allows filing of refund application for a period already covered under an earlier application

This Tax Alert summarizes a recent judgement of the Bombay High Court (HC) ^[1] on the validity of multiple refund applications filed by the taxpayer under section 54(1) of the Central Goods and Services Tax Act, 2017 (CGST Act) for the same tax period.

Assessee filed a refund application for the tax period of August 2022 which was rejected by the Revenue on the ground that assessee had earlier filed and obtained refund through a consolidated application covering the period July 2022 to September 2022. The petitioner contended that the August 2022 invoice had been inadvertently omitted from the earlier application. The rejection was thus challenged before the HC.

The key observations of the HC are: