JDA tax: trusts, societies, agricultural, leasehold and TP scheme land

This is Part 4 of a six-part study of how income tax treats joint development agreements. Part 1 asks when the landowner is taxed: transfer under section 2(47), Balbir Singh Maini and section 45(5A). Part 2 covers how much is taxed, at what cost and rate, and sections 54, 54F and 54EC. Part 3 takes families and business owners: HUFs, co-owners, heirs, minors, NRIs, dealers, firms and companies. Part 4 takes institutions and land of a special kind. Part 5 is the developer’s side, and Part 6 covers tax deduction, searches, reassessment and the move to the 2025 Act. Housing society redevelopment has two separate series: for the developer, the schemes, payments to members and revenue recognition and the minimum tax; for members, transfer, cost and holding period, hardship, corpus and rent, exit and resale and tenants, slums, shops and the society.

A joint development agreement is taxed on two variables before any figure is computed: who the landowner is, and what the land is. Section 45(5A), the provision that moves the landowner’s gain to the year of the completion certificate, opens only for an individual or a Hindu undivided family who transfers land or a building held as a capital asset. Every landowner in this Part fails one of those conditions or puts it in doubt.

Most of these landowners are taxed in the year of transfer under section 2(47), not the certificate year; rural agricultural land escapes capital gains, unless the Revenue shows it had stopped being agricultural or was traded; and the Gujarat Benches have decided the land questions (TP final plots, new tenure, NA conversion) but almost none of the institutional ones.

Key points

• Only an individual or a Hindu undivided family can use section 45(5A) (section 67(14) of the 2025 Act); L.K. Trust (Bangalore, 2026) held a private trust outside it, and trusts, deities, waqfs, AOPs and societies are taxed in the year of transfer.
• Whether flats received in kind count as net consideration utilised for a new asset under section 11(1A) (section 341(9) of the 2025 Act) is undecided; a one-off court-sanctioned JDA is not trade (Myadam Kishan Rao Charitable Trust, Hyderabad, 2024).
• Owners who pool plots under one agreement risk being assessed as an AOP (N.P. Bagwan, Bangalore, 2016); signing individually for one’s own land and share has worked (Jawahar N. Ghia, Mumbai, 2013).
• Rural agricultural land is not a capital asset, so a JDA on it yields no capital gain on the land; converting it first can create a gain, and the Revenue’s fallback is business income from an adventure in the nature of trade.
• New tenure land sold without the Collector’s sanction was held void and not transferred where possession never passed (Vallabhbhai Dhanjibhai Patel, Ahmedabad, 2024); where a developer takes possession, the Revenue will rely on section 2(47)(vi).
• Two Ahmedabad Benches cost a TP final plot on its own area, not the original plot’s (Makwana, 2022, where the scheme was only proposed; Dinesh Patel, 2017); an owner whose final scheme is in force argues that the final plot replaced the whole original plot (Shantilal Mangaldas).
• A right to load TDR on one’s own plot had no ascertainable cost before assessment year 2024-25 and, if unpurchased, has a nil cost under section 55(2)(a) since; on TDR received for surrendered land, Bangalore (Talera) and Chennai (Tiruponitura Narayanan) differed in 2026.

The section 45(5A) gateway: which landowners it shuts out

Section 45(5A) shuts out every landowner who is not an individual or a Hindu undivided family, every asset that is not land or a building, and every asset that is not a capital asset. The words that do this are in the opening of the sub-section: the deferral applies “where the capital gain arises to an assessee, being an individual or a Hindu undivided family, from the transfer of a capital asset, being land or building or both, under a specified agreement”. Section 67(14) of the Income-tax Act, 2025 says the same of “a person (being an individual or a Hindu undivided family)”.

The definition of “specified agreement” turns on a different person: “a person owning land or building or both” who agrees to allow another to develop a real estate project “in consideration of a share, being land or building or both in such project”. So an agreement signed by an individual and a trust together is still a specified agreement; the individual takes the deferral on his share and the trust does not.

The year of charge for an excluded landowner is the year of transfer. A trust, deity, waqf, AOP or society is taxed under section 45(1) in the year the transfer takes place under section 2(47), usually possession under a registered agreement (clause (v)) or an arrangement enabling enjoyment as owner (clause (vi)), as limited by Balbir Singh Maini; Part 1 sets out that law.

There is no statutory cost for the flats. Section 49(7) makes the deemed consideration the flats’ cost only where section 45(5A) applied; an excluded landowner must work out their cost from first principles, on the exchange view the value of what he gave.

The 23 July 2024 comparison is lost. The second proviso to section 112(1)(a), which caps the tax on land or building acquired before 23 July 2024 at the old 20 per cent indexed figure, is confined to “an individual or a Hindu undivided family, being a resident”. A trust, AOP or society pays 12.5 per cent without indexation on a transfer on or after 23 July 2024 (section 112(1)(d), “in any other case of a resident”), with no comparison, unless a specific trust wins the argument below.

Private trusts: specific and discretionary

A private trust that gives land under a JDA is assessed through its trustees as representative assessees, and on the only decision traced it is outside section 45(5A). Under section 161(1) of the 1961 Act the trustee is assessed “in his own name” but “in his representative capacity only”, and the tax is “levied upon and recovered from him in like manner and to the same extent as it would be leviable upon and recoverable from the person represented by him”. Section 304(1) of the 2025 Act carries those words.

The decided case: L.K. Trust

In L.K. Trust v. DCIT (ITAT Bangalore, ITA 1147 and 1375/Bang/2025, assessment year 2018-19, 9 June 2026) a private family trust (so described by the Bench) had converted its land at 46, Palace Road, Bangalore into stock in trade on 2 April 2009 and given it under a registered JDA of 21 July 2010 with Prestige Estate Project Ltd (as the order names it) for 55 per cent of the built-up area; it returned the section 45(2) gain and business income in assessment year 2018-19, and the appeal was about valuation. Part 3 sets out the facts and the valuation dispute.

The Tribunal held at paragraph 8.7 that section 45(5A) “applies to individuals or HUFs … However, the present assessee is private trust which entered into the JDA and property is being stock in trade. Therefore, in our considered view section 45(5A) has no application to this case, but for the determination of consideration this section can be referred”. Two facts sit in that sentence, status and stock, and the Revenue will cite it for the first, the trust for the limited proposition that it decided a stock-in-trade case.

Specific trusts: an argument that remains open

Where the trust deed names individual beneficiaries in fixed shares, the trust has an argument L.K. Trust did not consider. Section 161(1) taxes the trustee “in like manner and to the same extent” as the beneficiary, and a beneficiary who is an individual would have had section 45(5A). On that footing the gain is computed as the beneficiaries’ gain would be, deferral included. The Revenue’s answer is that section 45(5A) asks to whom “the capital gain arises”, that the trustees hold and transfer the land and are not an individual, and that representative assessment is collection machinery, not a way to borrow a status. No decision on a specific trust was traced.

Discretionary trusts and the maximum marginal rate

Where beneficiaries’ shares are not fixed, section 164(1) charges the “relevant income” at the maximum marginal rate. Explanation 1 deems income not specifically receivable for one person, and shares indeterminate, unless the person and his share are “expressly stated in the order of the court or the instrument of trust or wakf deed” and identifiable on its date. Section 307(1) of the 2025 Act carries the charge, and section 307(2) the exceptions. A discretionary trust taxed “at the maximum marginal rate” is not taxed “as” any individual, so the section 45(5A) argument for a specific trust is much weaker for it; the trust can only say that section 164 changes the rate, not the computation. Neither point has been decided.

The rate itself is disputed. Section 2(29C) defines the maximum marginal rate as the rate, including surcharge, “applicable in relation to the highest slab of income” of an individual, association of persons or body of individuals “as specified in the Finance Act of the relevant year”, as a Special Bench of the Mumbai Tribunal quoted it in Araadhya Jain Trust v. ITO (ITA 4272/Mum/2024, 9 April 2025), reproduced by the Rajkot Bench in Manjar Discretionary Family Trust v. ITO (ITA 164/RJT/2025, 15 October 2025). The trust’s case is that section 2(3) of each Finance Act, where section 164 or Chapter XII applies, determines the tax “with reference to the rates imposed by sub-section (1) or the rates as specified in that Chapter or section, as the case may be” (paragraph 24 of the Special Bench’s order), so a long-term gain bears the section 112 rate. The processing centre has acted on that footing: in Sanjay Nayar Family Trust v. ITO (ITAT Mumbai, ITA 2154 and 2155/Mum/2026, 15 July 2026) it taxed a private discretionary trust’s section 112A gains at 10 per cent, and only the surcharge was disputed. The Revenue’s case is the Authority for Advance Rulings’ view in P. No. 10 of 1996 (14 August 1996, paragraph 90): section 2(3) “does not solve the issue of priority” between section 112 and section 164, and “Perhaps the correct solution would be to give weightage to Section 164”; the Authority expressed no concluded opinion (paragraph 91). No decision on a discretionary trust’s long-term gain on land was traced, and a trustee should provide for the higher figure.

If the trust develops or trades in the land, section 161(1A) charges business profits at the maximum marginal rate on “the whole of the income”, whatever the shares, except for a sole will trust for dependent relatives; section 307(3) and (4) of the 2025 Act carry the rule.

Settling land into a trust before the JDA, and beneficiaries’ rights

Families sometimes settle land on trust before signing. Section 47(iii) of the 1961 Act (since 1 April 2025 confined to transfers “by an individual or a Hindu undivided family”, Act 15 of 2024) and section 70(1)(b) of the 2025 Act provide that a transfer of a capital asset under a gift, will or irrevocable trust is not a transfer, and section 49(1)(iii)(d) of the 1961 Act gives the trust the settlor’s cost where the asset came “under a transfer to a revocable or an irrevocable trust”. The holding period carries with it. The price of the move is the deferral: land that would have qualified in the settlor’s hands is outside section 45(5A) in a discretionary trust’s, and in a specific trust’s depends on the open argument above.

A beneficiary does not own the land and cannot give it under a JDA. In Vanraj Ranchhoddas Merchant v. ITO (ITAT Mumbai, ITA 5234/Mum/2025, 29 December 2025) a beneficiary assigned half his 20 per cent interest in ancestral family-trust property at Colaba to his nephew for Rs 28,00,000, and the lower authorities applied section 50C at the Valuation Officer’s figure of Rs 80,04,300. The Tribunal held that what was assigned “was only a life interest arising under a trust, coupled with an undivided share, which is determinable, extinguishable upon death and incapable of conferring dominion over the corpus of the property” (paragraph 33), and that its assignment “does not partake the character of transfer of land or building” (paragraph 35); the addition went (paragraph 37). The JDA must be signed by the trustees.

Charitable and religious trusts: section 11(1A), investments and registration

A charitable or religious trust that gives its land under a JDA is outside section 45(5A), is taxed in the year of transfer under section 2(47), and shelters the gain, if at all, through section 11(1A), the investment rules and its registration.

What section 11(1A) says

Section 11(1A)(a) applies “where a capital asset, being property held under trust wholly for charitable or religious purposes, is transferred and the whole or any part of the net consideration is utilised for acquiring another capital asset to be so held”. The capital gain is then “deemed to have been applied to charitable or religious purposes”: the whole gain where “the whole of the net consideration is utilised in acquiring the new capital asset”, and otherwise the part by which the amount utilised exceeds the cost of the transferred asset. “Net consideration” is the full value of the consideration less expenditure “incurred wholly and exclusively in connection with such transfer”. Section 341(9) and (10) of the 2025 Act carry the rule into Part B of Chapter XVII, “Special provisions for registered non-profit organisation”, as a head of deemed application of income.

Flats received in kind: the open question

The trust’s case on an area-sharing JDA is simple: the flats are both the consideration and a new capital asset; if they are held on the original trust, the whole net consideration has been “utilised in acquiring the new capital asset”, and clause (i) deems the whole gain applied. An exchange is an acquisition for value, and nothing in the clause requires money.

The Revenue’s case is as simple: “utilised” describes money spent, and a trust that receives flats as the price of its land has received consideration, not utilised it. On that reading clause (a) has nothing to work on, the gain is income of the year of transfer, and the trust must apply 85 per cent of it to its objects or accumulate it under section 11(2). The Revenue can add that clause (a) asks for an asset “to be so held”, and that flats which the trust plans to sell are not.

Timing sharpens the dispute: the gain arises in the year of transfer and the flats arrive years later. The clause states no time limit for utilisation, and the trust will rely on that. The Revenue may insist on utilisation in the year or within a reasonable period. Explanation 1 clause (2) to section 11(1), which lets a trust treat income applied in the year of receipt or the next year as applied in the year it was derived where it was not received in time, at an option exercised at least two months before the return due date (Finance Act 2023), is the trust’s best analogy and its fallback where the flats are sold and the money applied.

Investment rules: section 11(5) and section 13(1)(d)

Flats are a permitted investment: section 11(5)(x) lists “investment in immovable property” among the forms and modes for the trust’s funds, and Schedule XVI to the 2025 Act, applied through section 350, lists the same. Holding flats therefore does not breach section 13(1)(d), which denies exemption where funds are invested “otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11”; the 2025 Act makes such an investment “specified income” in clause 4 of the Table in section 337, taxable in the year it is made.

Related developers and section 13(1)(c)

A JDA with a developer connected to a trustee or founder raises section 13. Section 13(2)(h) and (3) catch funds invested in a concern in which a specified person, including “any trustee of the trust”, has a substantial interest, and section 13(1)(c) denies exemption to income applied for such a person’s benefit; under the proviso to section 164(2) (the third proviso to section 164(3) for a trust that is only partly charitable), income that loses exemption under section 13(1)(c) or (d) is taxed at the maximum marginal rate. The 2025 Act treats income applied “directly or indirectly, for the benefit of any related person” as specified income (section 337, Table clause 2), “related person” being defined in section 355. A sharing ratio better than an arm’s length developer would get is the Revenue’s evidence of benefit; a valuer’s report at signing is the trust’s answer.

Trade, registration and the proviso to section 2(15)

The Revenue’s larger weapon is registration. In Myadam Kishan Rao Charitable Trust v. CIT (Exemptions) (ITAT Hyderabad, ITA 445/Hyd/2023, 28 June 2024) a trust registered since 1992 had bought land at East Maredpally in 1979 for a hospital that was never built. The City Civil Court at Secunderabad, under section 34 of the Indian Trusts Act, permitted a JDA and sale with the proceeds to go to a hospital on leased land. The trust signed a JDA with Trishala Infratech on 16 August 2018, received Rs 5 crore under it, and sold its flats. The Commissioner (Exemptions) cancelled registration from the JDA date, saying among other things that the JDA and flat sales were trade within the proviso to section 2(15).

The Tribunal restored registration, saying at paragraph 16 “the Trust is not engaged in any kind of business activity”, that “The development activity has been taken up by the developer”, and that the trust had “only commercially exploited its property with the permission of the court”; a trust would be in trade “only if the appellant is engaged in the activity of buying and selling properties or entering into Joint Development Agreement with some other land owners for development of property on commercial lines and sells the property”.

The trust’s protection is a one-off JDA on surplus land, sanctioned by the court or the Charity Commissioner, with proceeds applied to objects. The Revenue’s opening is the Bench’s own description of trade: repeated JDAs, land bought for development, or a trust that markets its share. In Gujarat the public trusts law requires the Charity Commissioner’s sanction to alienate a public trust’s immovable property (its text was not read for this Part); without it the transfer’s validity, and so its year, is open to the argument that succeeded for new tenure land below.

Registration survives the change of Act. The Board’s transition FAQs of July 2026 answer at Q19: “Any registration or approval granted under the Income-tax Act, 1961 remains valid and protected under the section 536(2)(j) of the Income-tax Act, 2025.” Registration under the 2025 Act is in section 332.

Temples, deities, waqfs and educational societies

A deity, a temple or a waqf that holds land in its own name is an artificial juridical person, outside section 45(5A), and gets section 11 only if registered. Section 2(31)(vii) includes “every artificial juridical person, not falling within any of the preceding sub-clauses” in “person”.

The one decision traced shows what is lost without registration. In ITO v. Ishwar Chinta Haran Shiv Thakur (ITAT Kolkata, ITA 2841/Kol/2013, assessment year 2004-05, 8 September 2017) the assessee was a deity whose managing committee of five were its sebaits; it gave its land at 8, Ekdalia Road, Ballygunge under a development agreement of 16 June 1995 and later sold flats from its share. It claimed sections 11(1) and 11(1A), but it had no section 12A registration, which the Assessing Officer pointed out and the assessee accepted. The Tribunal annulled the reassessment as a change of opinion and said “we refrain to give our opinion on the merits” (paragraph 6.2). The concession, not a holding, is what the case shows: an unregistered deity cannot reach section 11(1A).

A waqf follows the trust rules: section 164’s Explanation 1 refers to the “wakf deed”, and section 303 of the 2025 Act names it. A public waqf for religious or charitable purposes claims section 11 if registered; a family waqf with determinate beneficiaries is a specific trust, and one with indeterminate shares a discretionary trust taxed at the maximum marginal rate. Alienation or long lease of waqf property needs the Waqf Board’s sanction under the Waqf Act, 1995, as renamed and amended in 2025 (neither text read for this Part); a JDA without it faces the same void-transfer argument as new tenure land.

An educational society approved under section 10(23C) must, under the third proviso to that clause, apply its income, or accumulate it for application, “wholly and exclusively to the objects for which it is established”, and keep its funds in the forms or modes of section 11(5); no counterpart of section 11(1A) was found in the clause as the Department prints it, so its JDA gain is income to be applied. One registered under section 12A or 12AB follows the charitable trust rules above; an unregistered society is an AOP taxed at normal rates, outside section 45(5A).

A local authority’s income chargeable under the head “Capital gains” is excluded from its total income by section 10(20), so a municipality that gives land under a JDA has no capital gains charge. A public-sector company is taxed as any company (Part 3), and a development authority should check its own exemption before signing.

Owners who pool contiguous plots: co-transferors or an association of persons

Owners of adjoining plots who sign one JDA are assessed individually unless what they do together, not the single document, creates an association of persons. If the group is an AOP, section 45(5A) is lost for all of them, the gain falls in the year of transfer, and if members’ shares are indeterminate the maximum marginal rate applies under section 167B (section 311 of the 2025 Act).

The test

The Supreme Court in M.M. Ipoh v. CIT (26 July 1967) quoted its earlier judgment in CIT v. Indira Balkrishna (1960): an association of persons “must be one in which two or more persons join in a common purpose or common action, and … the association must be one the object of which is to produce income, profits or gains”. The Explanation to section 2(31) now deems an AOP to be a person “whether or not such person or body … was formed or established or incorporated with the object of deriving income”, which weakens the second limb for the Revenue’s purposes. The first limb, common purpose or common action, is what keeps passive co-owners out.

On that limb co-heirs and co-owners have won consistently. In CIT v. Gool C. Dalal (Kerala High Court, 26 October 1989) two sisters who inherited and jointly sold forest land were not an AOP: the persons “must join in a common purpose or common action and the object of the association must be to produce income” (paragraph 8). In CIT v. Deghamwala Estates the Madras High Court held two brothers who, with the co-owners of the other half, sold inherited house sites at Sidhpur, Mehsana District, to be neither an AOP (5 April 1976) nor, on a second reference, a body of individuals (13 March 1979). The Revenue’s best High Court authority is CIT v. C. Karunakaran (Kerala High Court, 13 January 1988), where four sons who inherited a gold business and ran it together were an AOP “by reason of their common purpose or common action” (paragraph 7): the line is crossed by joint activity, not joint ownership.

The JDA decisions

For the owners: Jawahar N. Ghia. In ITO v. Jawahar N. Ghia and Others (AOP) (ITAT Mumbai, ITA 4665/Mum/2012, assessment year 2004-05, 19 November 2013) co-owners of inherited property at Santa Cruz (East) actually had an AOP, formed to receive rent and interest. They sold development rights by a development agreement of 9 November 2003, receiving 6,358 square feet and Rs 12,50,000 each. The Assessing Officer taxed a long-term gain of Rs 3,17,90,000 in the AOP. The Tribunal held at paragraph 5 that the agreement “is signed and executed by all the members of the AOP in their individual capacity and not as members of the AOP and the said agreement does not have any reference to the AOP”, and taxed the individuals. Even an existing AOP did not make the development agreement its own.

For the Revenue: N.P. Bagwan. In ITO v. N.P. Bagwan and Others (AOP) (ITAT Bangalore, ITA 1012 to 1014/Bang/2013 and connected appeals, assessment years 2008-09 to 2010-11, 30 June 2016) three family members who had “acquired agricultural lands independently” executed “a common agreement” for joint development of their separate lands near Hubli, with receipts going into family accounts. The Assessing Officer assessed an AOP ex parte and taxed the receipts as business income. The Tribunal upheld the AOP status, saying at paragraph 13 that “the degree of joint action between these three individuals is sufficient to form an AOP”, and sent the merits back. The finding is a sentence in an order mostly about notices, on an ex parte record. It is still the only order traced in which separately owned plots under one JDA were assessed as an AOP. The members’ cross objection, never answered, was that if one agreement made them an AOP, the developer who signed it was a member too.

Many owners, no association. In ACIT v. Mohammed Samir Ur Rahaman (ITAT Hyderabad, ITA 435, 438 and 441/Hyd/2022, assessment year 2016-17, 27 February 2024) the assessees and 42 other co-owners of about 12 acres had signed one JDA in 2007, replaced in 2016 by a tripartite agreement with a new developer, and the Assessing Officer taxed each co-owner on his own share; the association point was never taken.

How to draft

The Revenue’s case is strongest where the owners act as a unit after signing: a common pool of the owners’ area allotted among them after completion, a joint bank account for deposits, joint decisions on plans and phasing, or joint sale of the owners’ allocation. The owners’ case is strongest where each signs for his own land, individually or as karta, with his land, share and consideration stated separately and nothing pooled. A clause pooling the owners’ allocation and dividing sale proceeds is the clause that attracts Bagwan.

Owners who exchange strips to square up plots each make a transfer by exchange under section 2(47) on the value of the strip received, with section 50C as a floor, and get no section 45(5A) deferral for it. No decision on a pre-JDA swap was traced; equal areas at equal jantri rates usually produce little gain.

Cooperative societies as landowners, and development through a change of membership

A cooperative society that owns land is outside section 45(5A), and the first question in Gujarat is whether the society owns the land at all. A JDA by a society is taxed in the year of transfer, and section 45(3) (section 67(9) of the 2025 Act) expressly excludes “a co-operative society” from its contribution rule, so a member who puts land into a society is not caught by it.

Many Ahmedabad bungalow and tenement societies are what the Mumbai Tribunal in Colombia Co-operative Housing Society v. ITO (ITA 4222/Mum/2025, 22 December 2025, paragraph 7.1) called a “Tenant Ownership Housing Society”, in which “land is held by the society as a lessee/owner and members are the owners of the building on such plot of land”. A member who owns his bungalow can say he is “a person owning land or building or both” within section 45(5A), more strongly where the bye-laws also vest the plot in him; the Revenue’s answer is that he holds a share and an occupancy right in land that is the society’s. Part 1 takes that question. Where title is in the society, the society transfers and the members surrender rights, which from assessment year 2024-25 the Revenue will say have a nil cost as “any other right” under section 55(2)(a); a member who paid for his plot or shares answers that section 55(2)(a) gives nil only where there was no purchase. The redevelopment of a society’s flats, Circular 9 of 1969 and the society’s corpus are covered in the redevelopment series and are not repeated here.

The Gujarat decision closest to a society JDA is about development through a change of membership. In Hasmukhbhai Govindbhai Patel v. ACIT (ITAT Ahmedabad, IT(SS)A 84 to 89/Ahd/2023 and others, assessment years 2005-06 to 2011-12, 12 June 2024) a family’s land at Thaltej was held through Savita Co-operative Housing Society. On 12 March 2005 the family surrendered its membership and a developer group took fresh shares and built “Ashwavilla Bunglows”; a search on 5 October 2010 found a page recording Rs 16,63,87,100 received, and the Assessing Officer taxed a long-term gain of Rs 5,13,86,362 under section 2(47)(vi), the clause that names “becoming a member of, or acquiring shares in, a co-operative society”. The Tribunal found no valid transfer of membership because registration and stamp duty requirements were not followed (paragraph 25.6), noted that the title was in litigation (paragraphs 25.8 to 25.10), and, applying paragraphs 27 and 28 of Balbir Singh Maini, held that there “cannot be any question of charging the income under the head capital gain in a situation where the title is defective” (paragraph 25.11). The addition went.

Paragraph 25.7 of the same order says “there was a transfer ownership interest in the land effectively by bringing change in the membership of the society”, and the Revenue will rely on it, adding that Maini read clause (vi) as reaching any transaction enabling enjoyment “as a purported owner”. The order is a defective-title decision. A clean change of membership, registered and stamped, is likely to be held a transfer under clause (vi), whose words name it, in the year the developer’s group takes over; no order traced so holds.

Agricultural land: is it a capital asset at all?

Agricultural land in India is not a capital asset unless it lies within the urban areas defined in section 2(14)(iii), so a JDA on rural agricultural land produces no capital gain on the land. The definition excludes from “capital asset” “agricultural land in India, not being land situate”:

• “(a) in any area which is comprised within the jurisdiction of a municipality … or a cantonment board and which has a population of not less than ten thousand”; or
• “(b) in any area within the distance, measured aerially”, not more than two kilometres from the local limits of a municipality or cantonment board with population “more than ten thousand but not exceeding one lakh”, not more than six kilometres where the population is “more than one lakh but not exceeding ten lakh”, and not more than eight kilometres where it is “more than ten lakh”.

“Population” means “the population according to the last preceding census of which the relevant figures have been published before the first day of the previous year”. The tiers turn on the population of the municipality from whose limits the distance is measured, not the village where the land lies.

The Finance Act, 2013 substituted item (b) from assessment year 2014-15: the population tiers and the words “measured aerially” date from then. Before that, land within eight kilometres was a capital asset only if the Central Government had notified the area (Notification S.O. 9447 of 6 January 1994, which for Ahmedabad notified the area up to 8 kilometres from the municipal limits as they stood on that date; read only as the Commissioner (Appeals) quoted it in Akash Deep Farms). The Board’s Circular 17/2015 of 6 October 2015, as reproduced by the Ahmedabad Tribunal in Akash Deep Farms Pvt Ltd v. ITO (ITA 2564/Ahd/2012, 11 August 2016; the Department’s own copy of the circular was not opened for this Part), accepted the Bombay High Court’s decision in Maltibai R. Kadu (Nagpur Bench, 30 March 2015) that for earlier years the distance is “the shortest road distance”, and directed that no appeals be filed on the point.

The 2025 Act keeps the test in section 2(22)(iii), with the distance tiers recast as a table and the same population rule tied to the tax year.

What makes land agricultural

Whether land is agricultural is a question of fact on all the circumstances. In Smt. Sarifabibi Mohmed Ibrahim v. CIT (Supreme Court, 14 September 1993), a reference from Gujarat about land within Surat Municipality under a TP scheme sold in 1969 to a cooperative housing society at Rs 23 a square yard, the Court said “Whether a land is an agricultural land or not is essentially a question of fact” and “The inference has to be drawn on a cumulative consideration of all the relevant facts” (paragraph 12). Sarifabibi’s land was held not agricultural: the agreement to sell for housing, the permission to sell for a non-agricultural purpose, four years without cultivation, its location and its price together “outweigh[ed] the circumstances appearing in favour of the appellants’ case”, and the owners “had no intention to bring it under cultivation at any time after 1965-66” (paragraph 20).

The Gujarat High Court’s decision in CIT v. Siddharth J. Desai (22 September 1981), whose thirteen factors Sarifabibi reproduced at paragraph 16, went for the owner. A one-third co-owner of 15,054 square yards at Bilimora, cultivated for three years, sold to a housing society which obtained NA permission about four days after the conveyance. The High Court held the land agricultural at transfer, and answered in the negative the question whether it “ceased to be an agricultural land on the application for the permission made under section 63”.

The transfer date or the certificate date

Whether agricultural character is tested when the JDA is signed or when the certificate issues has not been decided. The owner’s case is that section 45(5A) charges the gain arising “from the transfer of a capital asset … under a specified agreement”: the transfer is under the agreement, and the sub-section moves only the year of charge and the measure of value, so land that was rural agricultural land when the JDA was signed and possession given yields no gain to postpone. The Revenue’s case is also textual: the sub-section fixes the year of charge and the full value on the certificate date, the Department’s explainer ends the holding period then, and on that date the land is a built project. No order traced decides the point.

The Pune Tribunal has heard the no-gain argument outside section 45(5A) but not decided it. In Popatrao Dashrathrao Suryawanshi v. ITO (ITAT Pune, ITA 234/PUN/2024, assessment year 2017-18, 21 January 2026) the owner signed a registered joint venture agreement on 20 January 2011 for 34 per cent of the constructed area and delivered possession; the occupancy certificate came on 23 December 2014 and he sold flats between 2013-14 and 2017-18. His counsel argued that the land was “agricultural land under cultivation situated beyond municipal limits”, so no gain arose in assessment year 2011-12 (paragraphs 17 and 22). The Tribunal found “some force” in that (paragraph 23), held the transfer took place in assessment year 2011-12 because the Assessing Officer had so found in earlier years, held that “the market value of the share of the assessee towards the flats is the cost of acquisition in the assessment year 2015-16” (paragraph 28), and remanded the computation. It made no finding on the land’s character, and the Assessing Officer had recorded that the owner converted the land into stock in trade and offered gains under section 45(2). The case is authority for the flats’ cost, not for the no-gain proposition, which rests on section 2(14)(iii) itself.

The Revenue’s answer, at full strength, comes from Sarifabibi: where the owner’s own agreement prices the land by the square yard, provides for a layout and residential permission, and contemplates no further cultivation, the land has ceased to be agricultural in substance before the transfer, wherever the NA order came from. That argument wins where the owner stopped farming long before signing.

The Revenue’s second line is that the gain is business income from an adventure in the nature of trade. Two orders answer it. In Shri Santhosh Meenakshi Textiles Pvt Ltd v. ITO (ITAT Chennai, ITA 2841/Chny/2019, assessment year 2013-14, 10 March 2021) a textile company had bought 54.89 acres of agricultural land in 2009 for Rs 50,13,300 and sold it in 2012 through an unregistered sale agreement and a registered power of attorney in the buyer’s favour; the Assessing Officer, relying partly on the buyer’s later development, taxed the profit of Rs 6,27,72,525 as business income. The Bench held that “subsequent action of the purchaser is not relevant to decide the nature of income” and that “the facts and circumstances prevailing at the time of event” decide it (paragraph 11). In Kutch Development Organisation v. CIT (ITAT Mumbai, ITA 2629/Mum/2012 and 236/Mum/2014, assessment year 2007-08, 29 May 2019) an association of 14 members with real estate objects sold agricultural land at Panvel lying beyond 8 kilometres of municipal limits; the Bench held that “whether the agriculture land is held as capital asset or as business asset, it does not alter the character of the asset” (paragraph 15), and that the object clause “is not determinative of the activity carried on” (paragraph 17). The Revenue’s reply is that agricultural character takes land out of “capital asset”, not out of business income where land is genuinely traded; both orders found it was not.

NA conversion, the Tenancy Act bar and the year of transfer in Gujarat

Converting agricultural land before the JDA ends its agricultural character and usually brings it into tax; leaving conversion to the developer keeps the land agricultural at transfer, but in Gujarat raises the question whether the agreement could transfer anything. The Gujarat law behind both points is the bar on sale of agricultural land to a non-agriculturist under section 63 of the Gujarat Tenancy and Agricultural Lands Act and the NA permission under section 65 of the Gujarat Land Revenue Code. Neither statute was read for this Part; they appear here as the Benches describe them.

The Ahmedabad and Surat split

Ahmedabad: the possession year. In ITO v. Jigneshbhai Shivabhai Patel (ITAT Ahmedabad, ITA 1757/Ahd/2015, assessment year 2011-12, 24 June 2022) the owner of agricultural land near Vadodara signed an agreement to sell and handed possession to the buyer-developer, Gayatri Enterprises, by a notarised letter of 31 March 2008. The buyer showed the land in its balance sheet, obtained NA permission on 4 March 2009, paid the conversion fee of Rs 1,33,540 and got the Corporation’s building permission; the sale deed came on 30 March 2011. The Assessing Officer added Rs 4,09,81,319 in assessment year 2011-12, arguing that the 2008 agreement offended section 63. The Revenue’s appeal was defective, having been filed by an officer other than the one who assessed, and failed on the merits as well: the Tribunal adopted the Commissioner (Appeals)’ finding that the transfer took place in assessment year 2008-09 under section 2(47)(v) and (vi) because “the purchaser has taken possession of the land in 2008 and incurred all the development expenses” (paragraph 5). The section 63 argument appears only in the passage of the lower order quoted at paragraph 4; the Tribunal did not address it.

Surat: the sale deed year. In Bhanuben Ramanbhai Surati v. ITO (ITAT Surat, ITA 769/SRT/2023, assessment year 2013-14, 28 May 2025) the owner of about 45,936 square metres of agricultural land at Viraval, Navsari, signed a notarised but unregistered development agreement with Balaji Organizers Pvt Ltd on 24 August 2011 for Rs 59,09,860, received Rs 35,00,000 in assessment year 2012-13, and executed the sale deed on 7 November 2012 reciting that possession was handed over “on today”. The Assessing Officer added Rs 3,71,95,880 under section 50C in assessment year 2013-14. Here the owner argued the earlier year, and lost. The Tribunal found that “the actual possession of the property was handed over to the buyer on 07.11.2012” (paragraph 7), agreed with the Commissioner (Appeals) that because “non-agriculturist cannot buy agricultural land” the transfer took place only on the sale deed (paragraph 7.1), and allowed credit for tax paid in the earlier year (paragraph 8.1).

They are reconcilable on facts: in Jigneshbhai the developer took possession and spent money on conversion under a written possession letter, while in Bhanuben the deed itself recited possession on its own date, and the agreement was unregistered, which after Balbir Singh Maini keeps it out of section 53A anyway. The principle is not reconciled. For the owner who wants the later year, Bhanuben and the tenancy law bar are the argument: an agreement the developer could not lawfully perform before conversion passes no possession in part performance. For the Revenue, Jigneshbhai shows that possession and conversion in fact are enough under clause (vi), whatever the tenancy law said.

The Ahmedabad Tribunal has added a point that strengthens the owner’s argument. In Popatbhai Dhanjibhai Patel v. ITO (ITAT Ahmedabad, ITA 1453/Ahd/2017, assessment year 2013-14, 24 February 2023) nine co-owners sold land at Gota to a partnership firm, which had paid the NA premium of Rs 3,49,64,000 to the State on their behalf on 4 March 2011. The owners relied on an earlier agreement to sell to take the agreement-date stamp value under the proviso to section 50C. The Tribunal found the agreement an “after-thought” and added (paragraph 12) that “as per prevailing law of the State of Gujarat, a partnership firm could not have purchased an agriculture land, this agreement to sell between a partnership firm … as the buyer and the assessee as seller was in any case invalid”. An agreement the Bench calls invalid is weak ground for a section 53A transfer in the agreement year.

Who pays for conversion, and whose is the uplift

NA charges paid on the owner’s behalf have been allowed to the owner as cost of improvement. In Vithalbhai Kalidas Patel HUF v. DCIT (ITAT Ahmedabad, ITA 303 and 324/Ahd/2017, assessment year 2013-14, 14 October 2019) two HUFs, each holding half of land at Sola sold to Nirvana Procon Pvt Ltd for Rs 10,71,00,000, claimed about Rs 2.69 crore each of conversion charges which, under the agreement, Nirvana Procon was to bear and paid to the Government. The Commissioner (Appeals) treated the payments as advances; the Tribunal, following the Gujarat High Court in Mathurdas Mangaldas Parekh v. CIT (5 August 1980), which had held TP scheme betterment charges paid to the Ahmedabad Municipal Corporation “in the nature of capital expenditure” that “go to improve the value of the land”, allowed them as cost of improvement. The order is short and does not discuss whether the sum also formed part of the consideration.

The Ahmedabad Tribunal has treated the uplift from buyer-paid conversion as the buyer’s. In Dhartivarsha Estate Holders Pvt Ltd v. ITO (ITAT Ahmedabad, ITA 2097/Ahd/2024, assessment year 2022-23, 2 September 2026), a buyer-side case, the sellers had agreed in 2011 to sell land at Okaf for Rs 4,93,36,000 and applied for NA permission at the buyer’s cost; it was granted on 4 February 2016 with fees of Rs 22,20,120 funded by the buyer, and under the Government’s policy 40 per cent of the area was retained, so the sellers’ holding fell to 60 per cent while the buyer paid for the whole. The Assessing Officer added Rs 10,97,76,245 under section 56(2)(x). The Tribunal deleted it, holding that the higher stamp value arose “only because the stamp value for transfer of non-agricultural land is higher than the agriculture land” and that “the cost of improvement has been borne by the prospective purchaser and not the seller … The appreciation in value, if any, due to conversion of the land to non-agricultural character has been generated by the buyers investment” (paragraph 6.4).

Outside section 45(5A) that order lets an owner whose developer funds conversion say the NA value is not his consideration for section 50C. Under section 45(5A), where the consideration is the stamp duty value of his share, a different point arises: from assessment year 2024-25 the deemed consideration includes consideration received “by any other mode”, and the Revenue may say a premium the developer pays to discharge the owner’s statutory liability is such consideration. The owner’s answer is Dhartivarsha: the premium was the developer’s cost of making the land fit for its project. If the owner concedes the gross-up, he must be allowed the same sum as cost of improvement, as Vithalbhai allowed, so the net effect is small.

Agricultural income from land under development

An owner who keeps returning agricultural income from land handed to a developer invites an addition; no decision on that precise point was traced. In B.S. Byregowda (HUF) v. ITO (ITAT Bangalore, ITA 177/Bang/2019, 17 May 2019) the Assessing Officer had reduced declared agricultural income of Rs 37,50,000 partly because the family had entered into a JDA and converted land; the Tribunal held that fact had “no relevance” where the finding on non-agricultural use was not the basis of the addition, and accepted the agricultural income on the Village Accountant’s and Revenue Inspector’s reports of cultivation, save half the sericulture income (paragraphs 6.3.1, 6.4, 7.1 and 7.2). The lesson cuts both ways: an owner who says the developer had only a licence can support his agricultural income with 7/12 crop entries and sale bills, but one who says possession passed early cannot also claim to have farmed the land.

Section 54B and section 10(37) for agricultural land given under a JDA

Section 54B can exempt the gain on urban agricultural land given under a JDA, but its two dates are hard to fit to a JDA, and section 10(37) does not apply to a JDA at all. This Part decides section 54B for the series; Part 2 covers sections 54, 54F and 54EC.

The text

Section 54B(1) applies “where the capital gain arises from the transfer of a capital asset being land which, in the two years immediately preceding the date on which the transfer took place, was being used by the assessee being an individual or his parent, or a Hindu undivided family for agricultural purposes … and the assessee has, within a period of two years after that date, purchased any other land for being used for agricultural purposes”. Only the gain above the new land’s cost is taxed, and the new land’s cost is reduced if it is sold “within a period of three years of its purchase”. Section 54B(2) requires an amount not used before the return due date under section 139(1) to be deposited in the Capital Gains Accounts Scheme, and taxes what stays unused when two years from the transfer expire. The 2025 Act has the rule in section 83, for “an assessee, being an individual or a Hindu undivided family”, in the same structure.

Four limits follow. Only an individual (or his parent’s use) or a Hindu undivided family qualifies. The new asset must be agricultural land, purchased; building a farmhouse on land already owned is not enough. The window runs two years after the transfer, with no “one year before”. And the provision matters only for urban agricultural land, because rural agricultural land is not a capital asset and produces no gain to exempt. The words “or a Hindu undivided family” came by the Finance Act, 2012, from 1 April 2013 (assessment year 2013-14). Whether the deposit under section 54B(2) is mandatory divides the High Courts as it does for sections 54 and 54F, and Part 2 sets out that division.

Two dates, one transfer

Both conditions key to “the date on which the transfer took place”, and section 45(5A) leaves that date in doubt: it makes the gain chargeable “as income of the previous year in which the certificate of completion … is issued” without saying the transfer takes place then.

On the JDA-date reading, the transfer took place when the registered agreement was signed and possession given. The two-year use test looks back from that date, and an owner who farmed the land until he signed passes it. But the new land must then be bought within two years of the JDA, which in a typical Gujarat project is before the certificate fixes the stamp duty value of his share, and so before he knows his gain. A shortfall cannot be cured later: the return for the year of charge falls after the two years have run.

On the certificate-date reading, which the Department’s taxpayer explainer on JDAs uses for holding period (a web page, not a circular), the window runs two years after the certificate, when the owner knows his gain; but the use test then looks at two years when the land was a construction site, and fails.

The owner’s way out is to say that section 45(5A) moves only the year of charge and the computation, so the use test runs from the JDA date and the window from the year the gain is charged. The Revenue will answer that the same words, “that date”, govern both conditions in the same sentence and cannot mean two different days. No decision on section 54B under section 45(5A) was traced. The safe course is the JDA-date reading, buying agricultural land within two years of the agreement in an amount estimated from the expected share, as the worked example below assumes.

Outside section 45(5A), where the transfer is in the JDA year, the dates fit, and the only questions are the use test (was the land actually farmed until the agreement) and the investment. Converting the land before the JDA puts section 54B at risk, because land converted and lying fallow is no longer “being used … for agricultural purposes”; the owner who farmed it until shortly before the transfer will argue that the two-year test looks at the period as a whole.

Section 10(37): compulsory acquisition only

Section 10(37) exempts an individual’s or Hindu undivided family’s capital gain on the transfer of urban agricultural land used for agriculture for two years, where “such transfer is by way of compulsory acquisition under any law, or a transfer the consideration for which is determined or approved by the Central Government or the Reserve Bank of India”, and the compensation is received on or after 1 April 2004. The 1961 text was read for this Part only as the Gujarat High Court quoted it in CIT v. Amrutbhai S. Patel (Tax Appeal 355 of 2013, 15 April 2013, paragraph 7). The 2025 Act has it in Schedule III, serial 18.

A JDA is a voluntary transfer outside the clause. Whether land taken for roads under a Town Planning Scheme, with compensation set against contribution, is “compulsory acquisition under any law” is arguable: the owner can cite Shantilal Mangaldas (1969), which treated the Bombay Town Planning Act, 1954 as a law for compulsory acquisition under Article 31; the Revenue, the same judgment’s description of the scheme as a readjustment. No tax decision was traced.

Worked example: agricultural land converted before the JDA, or given as agricultural land

Whether the owner converts before the JDA or gives the land as agricultural land changes his cost, his section 54B claim and, for rural land, whether there is a capital gain at all. The figures are illustrative. Ramesh, a resident individual, inherited urban agricultural land, within the distance bands, from his father, who held it before 1 April 2001; its fair market value on that date was Rs 40,00,000, not above its stamp duty value then. He signs a registered area-sharing JDA in financial year 2022-23, receiving Rs 50,00,000 by cheque on signing and a share of the flats. The completion certificate issues in financial year 2025-26, when the stamp duty value of his share is Rs 6,00,00,000, so the section 45(5A) full value is Rs 6,50,00,000. In column A he converts before the JDA and pays a premium of Rs 60,00,000 in 2022-23; in B1 and B2 he farms the land until he signs and the developer converts and pays. In B2 he buys other agricultural land for Rs 2,00,00,000 within two years after the JDA. Tax is before surcharge and cess. The certificate falls after 23 July 2024, so the tax is the lower of 12.5 per cent and 20 per cent with indexation (second proviso to section 112(1)(a)); A and B1 take the certificate year as the year of transfer, the Department explainer’s reading, and B2 the JDA year. The Cost Inflation Index values used are the Department’s: 100 (2001-02), 331 (2022-23) and 376 (2025-26).

	A. Owner converts to NA before the JDA	B1. Given as agricultural land, certificate-date reading	B2. Given as agricultural land, JDA-date reading with section 54B
Full value under section 45(5A) (stamp duty value of share plus cheque)	Rs 6,50,00,000	Rs 6,50,00,000	Rs 6,50,00,000
Cost: fair market value on 1 April 2001	Rs 40,00,000	Rs 40,00,000	Rs 40,00,000
Cost of improvement: NA premium paid by the owner	Rs 60,00,000	Rs 0 (paid by developer)	Rs 0 (paid by developer)
Gain without indexation	Rs 5,50,00,000	Rs 6,10,00,000	not used
Tax at 12.5 per cent	Rs 68,75,000	Rs 76,25,000	not used
Indexed cost and improvement	Rs 2,18,55,710	Rs 1,50,40,000	Rs 1,32,40,000
Gain with indexation	Rs 4,31,44,290	Rs 4,99,60,000	Rs 5,17,60,000
Exempt under section 54B (new agricultural land)	not available	not available	Rs 2,00,00,000
Taxable gain with indexation	Rs 4,31,44,290	Rs 4,99,60,000	Rs 3,17,60,000
Tax at 20 per cent with indexation	Rs 86,28,858	Rs 99,92,000	Rs 63,52,000
Tax payable	Rs 68,75,000	Rs 76,25,000	Rs 63,52,000
Cost of the flats for a later sale (section 49(7))	Rs 6,50,00,000	Rs 6,50,00,000	Rs 6,50,00,000

Column A pays less than B1 only because the owner’s premium is cost of improvement; the developer would have priced the same sum into the sharing ratio. Column B2 is cheapest, but it depends on a contestable reading of “the date on which the transfer took place” and on buying the new land before the gain was known. If the Revenue’s certificate-date reading prevails, B2 collapses into B1 and the Rs 2 crore of new land buys no exemption.

The same figures for rural land, outside the distance bands, show what conversion does:

	C. Given as agricultural land	D. Owner converts to NA before the JDA
Is the land a capital asset on the date of transfer	No	Yes
Capital gain on the land	Rs 0	Rs 5,50,00,000 (12.5 per cent computation)
Tax payable (lower of 12.5 per cent and 20 per cent indexed)	Rs 0	Rs 68,75,000
Cost of the flats for a later sale	Rs 6,00,00,000 (market value when received, as Popatrao Dashrathrao took it for flats from a JDA before section 45(5A))	Rs 6,50,00,000 (section 49(7))

Column C applies section 2(14)(iii); no Tribunal has yet decided a JDA on that footing. Its market-value cost for the flats comes from an order that remanded the computation, and the Revenue can argue that the cost is the value of the agricultural land given for them, which is far lower. The Revenue’s best answer on the land is Sarifabibi: an owner who signs a JDA priced for residential development has, on the cumulative test, stopped holding agricultural land before he transfers it; its fallback is business income. Column D is the price of converting too early: Rs 68,75,000 of tax that agricultural land would not have attracted.

Leasehold land: GIDC, AUDA and long leases

A perpetual lessee who signs a registered JDA makes a specified agreement on the only decision traced; whether he also gets the deferral is the further question below. In Sugee Seven Developers LLP v. ITO (TDS) (ITAT Mumbai, ITA 2313 to 2316/Mum/2025, assessment years 2020-21 to 2023-24, 10 October 2025) the developer had a development agreement with the holder, by succession of holders, of land on a perpetual lease granted in 1938, on which the “Zaver Vihar” building stood, and deducted 1 per cent under section 194-IA on cash of Rs 3,10,00,000, Rs 55,00,000, Rs 2,90,00,000 and Rs 3,96,00,000 over four years. After a survey the officer held section 194-IC applied at 10 per cent. The developer argued that a lessee is not “a person owning land” within the definition of specified agreement. The Tribunal disagreed at paragraph 8: the narrower reading “would lead to anomaly that transfer by the lease hold right owner under JDA would go out of the tax net”, and since section 45(5A) was introduced “to ease the tax burden”, a beneficial provision should not be read as inapplicable “to transferor holding leasehold rights”. It remanded only the alternative plea that the payee had offered the gain in the certificate year. The reasoning is general; the facts were a perpetual lease. A GIDC 99-year lease whose assignment needs the Corporation’s consent is distinguishable on facts, not on principle.

The lessee’s difficulty is consistency. Leaseholders who sell outright usually argue that section 50C, which reaches “a capital asset, being land or building or both”, does not apply to a right in land, as the Surat Bench held in Shri Prakashchandra Goyal (L/h of Late Kapil Prakashchandra Goyal) v. ITO (ITA 29/Ahd/2017/SRT, 14 November 2018, paragraph 8) for a 99-year lease of a shop; the Bombay High Court took the opposite view in Vidarbha Veneer Industries (1 April 2025), and Part 2 sets out that split. Sugee Seven read “a person owning land” in the agreement definition, not the charge on “a capital asset, being land or building or both”, and the 1961 Act imports rights in land through section 269UA(d) only for clauses (v) and (vi) of section 2(47); a lessee can try to distinguish the two, but the Revenue will cite Sugee Seven and Vidarbha Veneer together. A lessee who escapes section 50C on Goyal may find himself outside section 45(5A) as well, taxed in the year he gives possession.

Cost depends on what the lessee paid. A GIDC or AUDA allottee who paid a premium has a purchase price. A lessee holding over after expiry has a harder case: in Areez Pirozsha Khambatta v. ACIT (ITAT Ahmedabad, ITA 2111/Ahd/2011, 25 February 2019) a lease of 1924 renewed in 1958 had expired, the lessee stayed in possession paying rent, and the Tribunal treated him as “the deemed lessee” (paragraph 10) and allowed the market value on the then base date, refusing a nil cost under section 55(2)(a) because land is not in its list (paragraph 11). From assessment year 2024-25 section 55(2)(a) includes “any other right”, and the Revenue will say an unpurchased leasehold right now has a nil cost; the lessee will answer that a lease of land is an interest in land, which Areez held outside the list, and not a residual right.

New tenure land: the Collector’s sanction and the conversion premium

New tenure (navi sharat) land cannot be validly transferred without the Collector’s sanction and payment of the premium, and a JDA signed before both may not be a transfer at all. The rule comes from section 43 of the Gujarat Tenancy and Agricultural Lands Act, as the Gujarat High Court described it in Shashikant Mohanlal Desai v. State of Gujarat (7 January 1969) and the Ahmedabad Tribunal quoted it: land purchased by a tenant under section 32 shall not be transferred “without the previous sanction of the Collector and except on payment of such amount as the State Government may by general or special order determine”, and “if either of those two conditions is not fulfilled, the transfer would be invalid”. The statute itself was not read for this Part.

Void transfer, no capital gain

In ACIT v. Vallabhbhai Dhanjibhai Patel (ITAT Ahmedabad, ITA 07/Ahd/2021, assessment year 2012-13, 23 October 2024) three co-owners had bought new tenure agricultural land at Vesu, Surat in 2006 for Rs 12,64,098 without conversion or sanction, and cancelled the purchase by a registered deed of 19 May 2011, recovering their money; stamp duty on the cancellation was on a jantri value of Rs 7,06,00,000. The Assessing Officer treated the cancellation as a transfer and added Rs 6,99,62,674 under section 50C. The Tribunal described new sharat land as land that “actually belong to the Government”, which “cannot be sold to any person without first obtaining permission from District Collector”, conversion requiring “A premium of 40% of the actual cost of the land” (paragraph 9.1, the Bench’s description, not a verified statement of current rates), and held the 2006 purchase “void ab initio”, so the cancellation “have not actually transferred any property” and section 50C could not arise (paragraph 10).

For a JDA the consequence runs both ways. An owner who signs before conversion can argue, on Vallabhbhai, that nothing was transferred until sanction was obtained and the agreement acted on, so the year of transfer, and section 45(5A)’s “specified agreement”, start later. The Revenue’s answer is section 2(47)(vi): a transaction that in fact gives the developer possession and enjoyment is a transfer for income tax even if the tenancy law makes it void, and Vallabhbhai is distinguishable where possession actually passed, since there the original owners kept the land and the revenue record never changed.

The premium: whose cost

Where the buyer pays the premium as a condition of the deal, the Ahmedabad Tribunal has kept it out of the seller’s gain. In Ramilaben Ganpatbhai Patel v. ITO (ITA 2968/Ahd/2017, assessment year 2012-13, 11 May 2022), followed in Arunaben Kaushikkumar Patel v. ITO (20 July 2022), the buyer paid Rs 2,28,24,000 to the State on 6 April 2011 “as premium for conversion of Navi Sharat to Purani Sharat”; the Tribunal approved a computation that deducted it, with the sums received by the earlier agreement holder, from the gain computed on the Valuation Officer’s figure, leaving a long-term capital gain of Rs 1,18,92,800 for the four heirs. Where the owner pays, no Tribunal has decided the point on contest. The owner’s argument is Mathurdas Mangaldas Parekh: a statutory levy that removes a restriction gives “an enduring advantage” and improves the land’s value. The Revenue’s argument is that cost of improvement under section 55(1)(b) means “additions or alterations to the capital asset” and a premium changes title, not the asset. A JDA should say whether a developer’s payment discharges the owner’s liability (consideration and cost, net nil) or is the developer’s own cost (Ramilaben’s net approach).

Tenanted land and protected tenants

Land in a protected tenant’s possession gives the landowner a smaller interest to transfer, and payments to clear tenants must be allocated in the agreement. The tenant’s own surrender, and its cost, are covered in the redevelopment series.

The landlord’s cost should reflect the encumbrance. A landowner who takes the market value on 1 April 2001 under section 55(2)(b) for land then in a protected tenant’s possession is valuing a reduced interest; a valuer who ignores the tenancy overstates his cost.

Payments by the developer to tenants are the landowner’s consideration where they discharge his obligation, or the developer’s cost of acquiring the tenant’s right; the agreement should say which.

Town Planning Schemes: original plot, final plot, contribution and compensation

A Town Planning Scheme substitutes a final plot for the owner’s original plot without, in property law, any transfer; for income tax no decision says whether that substitution is a transfer, but two Ahmedabad Benches cost the final plot on its own, smaller area.

What the scheme does to title

The Supreme Court described the mechanism under section 53 of the Bombay Town Planning Act, 1954 in State of Gujarat v. Shantilal Mangaldas (Constitution Bench, 13 January 1969): the owner’s “ownership in the original plot is extinguished and simultaneously therewith he becomes the owner of a reconstituted plot”; “Section 53 does not provide that the reconstituted plot is transferred”; it is a “statutory readjustment”, with “no vesting of the original plots in the local authority nor transfer”. Shantilal’s holding on the adequacy of compensation under Article 31 was later disapproved; its description of the scheme is unaffected. In Mrugendra Indravadan Mehta v. Ahmedabad Municipal Corporation (Supreme Court, 10 May 2024), a dispute over an undelivered final plot in TP Scheme No. 6, Paldi, the Court summarised section 67(b) of the Gujarat Town Planning and Urban Development Act, 1976 as providing that “all rights in the original plots, which have been reconstituted into final plots, shall determine” (paragraph 21), and restated Shantilal’s description that there is “no vesting of original plots in the local authority” (paragraph 24).

The owner’s reading is continuity: the final plot is the same capital asset reshaped, with the original cost, or the 1 April 2001 value, and the original holding period. The Revenue’s reading is section 2(47)(ii), “the extinguishment of any rights therein”, using the Court’s own word: the owner transferred the original plot when the final scheme came into force and acquired the final plot then. That view usually helps the owner on cost and hurts him where the scheme came into force within twenty-four months of the JDA, or where the earlier year’s gain is open.

Cost on the final plot area: the Ahmedabad line

In Rajendra Laxmanbhai Makwana v. ITO (ITAT Ahmedabad, ITA 3270/Ahd/2016 and 1183/Ahd/2017, assessment year 2012-13, 8 April 2022) three brothers had inherited 8,470 square yards at Saijpur Bogha, Naroda. Under TP Scheme No. 47 about 908 square yards went to road and about 1,608 to the Corporation, leaving Final Plot No. 44 of 5,954 square yards, which they sold to a developer firm in 2011 for Rs 5,04,43,000. They claimed the 1 April 1981 value of the whole 8,470 square yards. The Tribunal held that “the cost of acquisition with reference to the land so transferred only can be claimed as deduction”, the land reserved for road and the Corporation having “never [been] the subject matter of transfer”, and that the area to be considered was “5954 sq. yard … and not the total area of land of 8470 sq. yards” (paragraph 16). It recorded that the scheme was only proposed when the land was sold and that any compensation for the deducted land would go to the sellers.

Dinesh Bhailalbhai Patel v. DCIT (ITAT Ahmedabad, ITA 3650 to 3652/Ahd/2015, 22 December 2017), on Final Plot No. 187, TP Scheme No. 7, Anand, left standing a computation of cost on the final plot’s 2,996 square metres rather than the original 3,946; its paragraph 5 is garbled, so cite it for that outcome only.

In ITO v. Babubhai Haribhai Patel (ITAT Ahmedabad, ITA 257/Ahd/2011, 19 December 2014) a Surat co-owner’s deed recited that the draft scheme allotted Final Plot No. 81 of 6,161 square metres for an original plot of 8,802; the Tribunal held “the capital gain is to be calculated on the basis of stamp duty value of 6161 sq. mts. of plot which alone was transferred by the assessee” (paragraph 8), remanding the valuation to the Assessing Officer in an appeal heard ex parte. Section 50C, and by parity the stamp duty value of the owner’s share under section 45(5A), attaches to the final plot area, not the survey area.

The owner’s best answer to Makwana is its facts: the scheme was only proposed, the deducted land still held and compensation reserved. Where the final scheme is in force and the compensation has been set off against contribution, the owner received the final plot in place of the whole original plot (Shantilal) and has nothing else to set the balance of cost against. The Revenue will say Makwana is a direct Ahmedabad holding that cost follows the area transferred.

Contribution, betterment and compensation

Contribution and betterment charges paid under a scheme are capital expenditure (Addl. CIT v. Rohit Mills Ltd, Gujarat High Court, 10 November 1975) and cost of improvement: in Mathurdas Mangaldas Parekh the High Court held betterment charges of Rs 60,390 on a final plot in TP Scheme No. 20 at Kocharab gave “an enduring advantage” and “go to improve the value of the land”. Contribution paid by the developer, as Babubhai’s buyer agreed to pay it, is the owner’s consideration and cost; money compensation is consideration for the land taken. Under the 1976 Act the final scheme sets compensation against contribution (the provision was not read for this Part), and the owner who accepts Makwana’s apportionment should claim the cost of the deducted land against the compensation in the year it is adjusted, or lose it.

Worked example: apportioning cost to a final plot

On the Ahmedabad Tribunal’s approach in Makwana, a final plot carries the cost of the area actually transferred, not of the whole original plot. The figures are illustrative. Harish, a resident individual, has held a 10,000 square yard original plot since before 1 April 2001, when it was worth Rs 1,50,00,000. The final scheme comes into force in financial year 2023-24, giving him a 6,000 square yard final plot, levying contribution of Rs 36,00,000 and allowing compensation of Rs 24,00,000 for the 4,000 square yards deducted; he pays the net Rs 12,00,000 that year. Under a registered JDA the certificate issues in financial year 2025-26, when his section 45(5A) full value is Rs 8,00,00,000. Tax is before surcharge and cess, at the lower of 12.5 per cent and 20 per cent with indexation (second proviso to section 112(1)(a)). The Cost Inflation Index values used are the Department’s: 100 (2001-02), 348 (2023-24) and 376 (2025-26). Column (3) assumes the deducted land is a separate transfer for the compensation in 2023-24, before 23 July 2024, with the loss returned in time and carried forward.

Item	Figure
Original plot (held since before 1 April 2001)	10,000 sq yd
Final plot after the final scheme came into force in FY 2023-24	6,000 sq yd
Fair market value of the original plot on 1 April 2001	Rs 1,50,00,000
Contribution levied on the final plot	Rs 36,00,000
Compensation for the land deducted, adjusted against the contribution	Rs 24,00,000
Net contribution paid by the owner in FY 2023-24	Rs 12,00,000
Section 45(5A) full value on the certificate date in FY 2025-26	Rs 8,00,00,000

	(1) Whole original cost rides on the final plot	(2) Cost apportioned to the final plot area (Makwana, Dinesh Patel)	(3) Apportioned, with the deducted land treated as transferred for the compensation
Cost of land set against the JDA gain	Rs 1,50,00,000	Rs 90,00,000	Rs 90,00,000
Cost of improvement (contribution)	Rs 12,00,000 (net)	Rs 12,00,000 (net)	Rs 36,00,000 (gross)
Long-term capital loss on the deducted land, FY 2023-24 (compensation Rs 24,00,000 less indexed cost Rs 2,08,80,000)	not recognised	not recognised (cost of Rs 60,00,000 lost)	-Rs 1,84,80,000
Gain without indexation, after set-off of any loss	Rs 6,38,00,000	Rs 6,98,00,000	Rs 4,89,20,000
Tax at 12.5 per cent	Rs 79,75,000	Rs 87,25,000	Rs 61,15,000
Gain with indexation, after set-off of any loss	Rs 2,23,03,448	Rs 4,48,63,448	Rs 2,37,90,345
Tax at 20 per cent with indexation	Rs 44,60,690	Rs 89,72,690	Rs 47,58,069
Tax payable (the lower, under the second proviso to section 112(1)(a))	Rs 44,60,690	Rs 87,25,000	Rs 47,58,069
Extra tax compared with column (1)	Rs 0	Rs 42,64,310	Rs 2,97,379

Apportionment without more costs Harish Rs 42,64,310, because Rs 60,00,000 of cost disappears. Column (3) recovers most of it by recognising the deducted land as transferred for its compensation, but only if he returned that loss for 2023-24; a capital loss carries forward only from a return filed in time (sections 74 and 80 of the 1961 Act), and a 1961 loss still unabsorbed after 1 April 2026 continues for the balance of eight years under section 536(2)(n) of the 2025 Act. Column (1) is the owner’s continuity argument.

Power of attorney holders and GPA sales

A JDA signed by a power of attorney holder for the registered owner is the owner’s transfer; a JDA signed by a GPA “purchaser” in his own name is a trap for both of them. The Supreme Court in Suraj Lamp and Industries (P) Ltd v. State of Haryana (11 October 2011) described a power of attorney as an agency (paragraph 13) and held that “a SA/GPA/WILL transaction does not convey any title nor create any interest in an immovable property” (paragraph 15) and that GPA sales “do not convey title and do not amount to transfer” (paragraph 16), while such documents may still be treated as agreements of sale and used to defend possession under section 53A (paragraph 18).

The Ahmedabad Benches have divided on what that means for tax. In Smt. Sandhyaben A. Purohit v. ITO (ITA 1536/Ahd/2011, 8 February 2013) a plot was sold for Rs 12 lakh with payment and possession in 2001 but registration in 2003; following Chaturbhuj Dwarkadas Kapadia, the Tribunal held the transfer took place under section 2(47)(v) in 2001, and that Suraj Lamp, decided under the Transfer of Property Act, was not authority on the Income-tax Act, so “the reliance placed by the Revenue on the said precedent was misplaced” (paragraph 8). In Umesh Sumanlal Shah v. ITO (ITA 967/Ahd/2023, 14 June 2024) the Bench likewise held that Suraj Lamp “will not be applicable” to deny section 54 where the price had been paid and possession taken (paragraph 7). In DCIT v. Vishnubhai Vithalbhai Patel (HUF) (ITA 1605/Ahd/2016, 23 May 2019) an HUF that had passed agricultural land at Unvarsad to a samaj by two registered irrevocable GPAs was held to have made “no transfer of the land upon the execution of power of attorney” (paragraph 7), following Suraj Lamp, though the Bench noted that section 2(47)(vi) “appears” to cover it; the transfer was the registered sale deed of 19 April 2012, so the addition for assessment year 2012-13 was deleted.

After the 2001 amendment to section 53A, an unregistered GPA sale is weak ground for clause (v); clause (vi), a transaction “enabling the enjoyment of” immovable property, remains the Revenue’s route, and Maini read it as reaching de facto transfers of ownership. The JDA risk is double taxation of the registered owner as title holder and the GPA holder on the flats he receives. A GPA purchaser should take a registered conveyance before signing a JDA, and an owner whose land was “sold” by GPA should deal with that transaction in writing first.

Plotted developments and plots received under a JDA

A landowner who receives plots, or villas on plots, instead of flats is in the same position for transfer and timing, and his retained share includes his proportion of roads and common areas. In Sama Subhash Reddy v. ITO (ITAT Hyderabad, ITA 780/Hyd/2017, 21 March 2018) the assessee, one of fifteen owners, had given his 1 acre 33 guntas under an agreement to share “the plots with houses” 45:55 with the developer; the assessee was later allotted seven villas with 2,275 square yards of land, and the Assessing Officer held that he had kept only 25.78 per cent and transferred 74.22 per cent. The Tribunal held that “the area covering roads and common facilities etc., also falls to the share of the assessee” in the same ratio (paragraph 9) and remanded the computation on 45 per cent of the plotted area including roads.

Section 45(5A) speaks of consideration “of a share, being land or building or both”, so a plot is within it on the words. The open question is the certificate: the “competent authority” is “the authority empowered to approve the building plan”, and a layout whose development works are certified complete may not produce a “certificate of completion” of the kind a building gets. Open question 11 below sets out both sides; nothing traced decides whether a Gujarat layout completion counts.

Transferable development rights: loaded on the land or received for it

TDR is taxed differently depending on whether the owner was paid for letting it be loaded on his plot, received it for land surrendered, or was paid extra for it under the JDA, and the Benches are split on the second. No Gujarat decision on TDR was traced.

Rights to load TDR on one’s own plot. In Jethalal D. Mehta v. DCIT (ITAT Mumbai, 27 January 2005) the leaseholder of a “receiving plot” was paid Rs 33,62,500 for letting a developer load TDR; the Tribunal held that “What the assessee has transferred is not the plot or the building, but a right parting with which does not result in parting with land or building”, that the right had no cost, and that the receipt was not taxable, while directing that the Assessing Officer “will consider reducing the cost of acquisition” of the plot when it was sold (paragraphs 5 and 6). ITO v. Kirit Raojibhai Patel (ITAT Mumbai, ITA 2339/Mum/2017, 14 February 2022) applied the Bombay High Court’s decision in Sambhaji Nagar Co-operative Housing Society, as the Tribunal reproduced it, to an individual paid Rs 1,86,20,000 for TDR loading on a Juhu plot (paragraph 34). From assessment year 2024-25 section 55(2)(a) gives “any other right” not acquired by purchase a nil cost; the Chennai Bench below read that amendment as prospective, and the Bangalore Bench held it does not reach TDR acquired by surrendering land. The owner’s answer for later years is that under a JDA he transfers land with its development potential as one asset, and the section 45(5A) stamp duty value of his share already includes any area built with TDR.

Extra cash for TDR under the JDA. In Sunil Pran Sikand v. ACIT (Bombay High Court, ITXA 259 of 2003, 19 April 2024) the developer’s commitment letter promised the landowner Rs 1,000 a square foot of TDR it could load, and paid Rs 1,00,92,750 in 1996-97. The Court held the agreement and the letter “should be read as one agreement” and the sum consideration for the development rights of 1992, long-term capital gain “in the year the amount was received” (paragraphs 7 and 8); the no-cost question was not pressed.

TDR received for land surrendered. In Kamlesh Pukhraj Talera v. DCIT (ITAT Bangalore, ITA 1917/Bang/2025, assessment year 2018-19, 14 August 2026) an owner who had surrendered 2,839.55 square metres to BBMP for road widening in 2010 sold the TDR for Rs 6,01,53,500 and claimed it exempt. The Tribunal held the surrender itself a transfer, the TDR a capital asset with a cost “equal to value of land surrendered to acquire it (or fair market value of TDR at the time of its acquisition)”, and the 2023 amendment aimed at “self-generated assets”, not TDR acquired “by surrender of land” (paragraphs 32 to 37); it dismissed the appeal but directed deduction of the land’s cost. In Ramakrishnan Tiruponitura Narayanan v. DCIT (ITAT Chennai, ITA 2757 and 2758/Chny/2025, assessment year 2016-17, 1 July 2026) co-owners whose land was compulsorily acquired took TDR instead of compensation and sold it for Rs 3,09,35,786 each; the Tribunal held the TDR “a right distinct from the land”, with no cost provided by section 55 for that year, so “The computation provisions of Section 48 thus break down” and nothing was taxable (paragraphs 14 and 15). Both reject a nil cost; they differ on whether the cost is the land given up or unascertainable. Where the land was compulsorily acquired, the owner should also plead the exemption in section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, which the Pune Tribunal remanded for examination in DCIT v. Dilip Motilalji Chordia (ITA 1486/PUN/2024, 22 December 2025) and the Chennai Bench left open (paragraph 16); that Act was not read for this Part. For Ahmedabad both are coordinate Benches: a Bench follows one on like facts or, if it disagrees, recommends that the President constitute a Special Bench under section 255(3) (section 364(4) of the 2025 Act).

Gujarat: what the record shows

The Gujarat record decides questions about the land and almost none about the institutions. For trusts, deities, waqfs, pooled owners, leaseholders and plotted developments, no decision of the Gujarat High Court or the Ahmedabad, Surat or Rajkot Benches was traced. The only Ahmedabad order on a co-operative society as landowner, Nikanth (Narol) Co-op. Shops and Off Society (23 January 2025), remanded an ex parte assessment built on reporting-authority data, which Part 6 discusses.

On land, Gujarat has four lines beyond the agricultural-character test of Siddharth J. Desai (1981) and Sarifabibi (1993). Agricultural land handed to a developer: Jigneshbhai Shivabhai Patel (Ahmedabad, 2022) taxed the possession year; Bhanuben Ramanbhai Surati (Surat, 2025) the sale deed year because a non-agriculturist cannot buy; Popatbhai Dhanjibhai Patel (Ahmedabad, 2023) called an agreement with a firm for agricultural land invalid. Conversion costs: Rohit Mills (1975) holds contribution capital expenditure and Mathurdas Mangaldas Parekh (Gujarat High Court, 1980) holds betterment charges cost of improvement; Vithalbhai Kalidas Patel HUF (2019) extended that to NA charges, even where the buyer paid them on the sellers’ behalf; Dhartivarsha (2026) gave the NA uplift to the buyer who paid for it. New tenure: Vallabhbhai Dhanjibhai Patel (2024) held an unsanctioned sale void and no transfer; Ramilaben and Arunaben (2022) deducted a buyer-paid premium. TP schemes: Makwana (2022), Dinesh Patel (2017) and Babubhai Patel (2014) cost and value the final plot on its own area. Hasmukhbhai Govindbhai Patel (2024) is the one Gujarat order on development through society membership, and Sandhyaben Purohit (2013) and Vishnubhai Patel (2019) divide on GPA sales.

No Gujarat decision applies section 45(5A) to any landowner in this Part, decides section 54B on JDA land, or decides whether a TP scheme reconstitution is a transfer.

Open questions in Part 4, argued both ways

Eleven questions in this Part remain open, each set out with the argument on both sides.

1. Can a specific private trust use section 45(5A)? For the trust: section 161(1) taxes the trustee “in like manner and to the same extent” as the individual beneficiary. For the Revenue: section 45(5A) tests the status of the person to whom the gain arises, and L.K. Trust (2026) held a private trust outside it. Undecided for a trust holding land as a capital asset.

2. Are flats received by a charitable trust “net consideration … utilised for acquiring another capital asset” under section 11(1A)? For the trust: the flats are both the consideration and the new asset, so the whole gain is deemed applied. For the Revenue: “utilised” means money spent. No decision.

3. Do owners pooling plots under one agreement form an AOP? For the owners: co-transferors are not co-venturers (Jawahar N. Ghia, Gool Dalal, Deghamwala). For the Revenue: joint action to procure and share a development is association (N.P. Bagwan; Karunakaran). Decided on the drafting and conduct in each case.

4. Is agricultural character tested on the JDA date or the certificate date? For the owner: the transfer is under the agreement; section 45(5A) moves only the year of charge and the measure of value. For the Revenue: the sub-section fixes charge and value on the certificate date, when the land is built on, and on Sarifabibi’s cumulative test land priced for development has ceased to be agricultural. No decision under section 45(5A).

5. When does agricultural land handed to a non-agriculturist developer pass? For an early year: possession and conversion in fact (Jigneshbhai Patel). For a late year: the tenancy law bar (Bhanuben Surati; Popatbhai Patel). A Gujarat split with no High Court ruling.

6. Which date governs section 54B under section 45(5A)? For the owner: the use test by the JDA date and the window by the charge. For the Revenue: “that date” means one day, and either reading defeats one condition. No decision.

7. Is a GIDC or AUDA lessee within section 45(5A), and can he also escape section 50C? For inclusion: Sugee Seven (perpetual lease). Against section 50C: Goyal (Surat, 2018); V.S. Chandrashekar (Karnataka High Court, 2021, an agreement holder’s rights; read as reproduced). For section 50C: Vidarbha Veneer (Bombay High Court, 2025).

8. Does a JDA on new tenure land before sanction transfer anything? For the owner: a void transfer is no transfer (Vallabhbhai). For the Revenue: section 2(47)(vi) catches possession and enjoyment in fact. Open where possession passed.

9. Is a TP reconstitution a transfer, and does the whole original cost ride on the final plot? For the owner: substitution without transfer (Shantilal Mangaldas; Mrugendra Mehta). For the Revenue: cost follows the area transferred (Makwana; Dinesh Patel), or extinguishment under section 2(47)(ii). No income-tax decision on the first question.

10. What is the cost of TDR received for surrendered land? The land given up (Talera, Bangalore, 2026) or unascertainable, so no charge (Tiruponitura Narayanan, Chennai, 2026). A coordinate Bench split.

11. Does a layout completion count as the “certificate of completion” for plots received under a JDA? For the owner: certified completion of a layout’s development works, by the authority that approves the plan, is the analogue, so section 45(5A) defers the gain to that date. For the Revenue, where it suits: no qualifying certificate issues for a layout, so the year of transfer governs. No decision.

A practitioner’s checklist

Each step below states the risk it guards against.

1. Fix the landowner’s status before drafting. A trust, AOP, society or deity loses section 45(5A) and the 23 July 2024 comparison; the risk is tax in the year of possession, years before any flat.
2. For a private trust, read the deed. Fixed shares give an arguable section 45(5A) claim; indeterminate shares mean the maximum marginal rate; settling land into a trust before the JDA puts the settlor’s deferral at risk.
3. For a charitable trust, obtain the court’s or Charity Commissioner’s sanction and resolve that the flats are held on the original trust; the risks are a void transfer, a trade finding under the proviso to section 2(15) and loss of section 11(1A).
4. Keep trust cash in permitted modes and avoid related developers. The risk is section 13(1)(d) or 13(1)(c) and the maximum marginal rate under the proviso to section 164(2).
5. For pooled plots, one owner, one land, one share. Sign individually, state each owner’s land and consideration, and pool nothing; the risk is an AOP assessment (N.P. Bagwan).
6. Measure the land against section 2(14)(iii) on the transfer date. Use the last published census and aerial distance from assessment year 2014-15, and the 1994 notified areas and road distance before; the risk is misjudging whether the land is a capital asset.
7. Do not convert rural land before the JDA without counting the tax. The risk is a gain that would not otherwise exist (column D) and the loss of section 54B.
8. Keep the 7/12 extracts, crop entries and sale bills up to the JDA. They prove agricultural use; the risk is an addition for agricultural income claimed after possession passed.
9. Buy section 54B land within two years of the JDA date, estimating the gain; the risk is that the window closes before the completion certificate.
10. Say in the JDA who pays the NA, new tenure and TP premiums and why. The risk is a gross-up as consideration, or loss of the cost of improvement.
11. For new tenure land, obtain sanction and pay the premium before signing. The risk is a void agreement and an uncertain year of transfer.
12. For a lessee, check the lease and the authority’s consent before relying on Sugee Seven; the risk is an inconsistent position on section 50C.
13. For a TP final plot, record the original and final areas, the compensation and the contribution, and return any loss on the deducted land in time. The risk is Rs 60 lakh of lost cost, and Rs 42.64 lakh of extra tax, in the worked example.

Concordance: the Income-tax Act, 1961 and the Income-tax Act, 2025

Each 1961 provision used in this Part is paired below with its counterpart in the Income-tax Act, 2025.

Subject	Income-tax Act, 1961	Income-tax Act, 2025
Capital asset; agricultural land exclusion	section 2(14)(iii)	section 2(22)(iii)
Transfer: extinguishment, part performance, enabling enjoyment	section 2(47)(ii), (v), (vi)	section 2(109)(b), (g), (f)
Agricultural land exemption on compulsory acquisition	section 10(37)	Schedule III, serial 18
Capital gain of a charitable trust deemed applied	section 11(1A)	section 341(9) and (10)
Permitted investments, including immovable property	section 11(5)(x)	section 350 with Schedule XVI
Investment outside permitted modes; benefit to related persons	section 13(1)(d); section 13(1)(c)	section 337, Table clauses 4 and 2
Registration of a charitable trust	sections 12A, 12AB	section 332
Conversion of a capital asset into stock in trade	section 45(2)	section 67(6)
Contribution of a capital asset to a firm, AOP or BOI	section 45(3)	section 67(9)
Capital gains under a specified agreement; definitions; proviso	section 45(5A)	section 67(14), (15), (16)
Gift, will or irrevocable trust not a transfer	section 47(iii)	section 70(1)(b)
Cost of the share received under a specified agreement	section 49(7)	section 73(1), Table serial 20
Stamp duty value as full value of consideration	section 50C	section 78
Exemption for agricultural land reinvested in agricultural land	section 54B	section 83
Cost of improvement; 1 April 2001 value and its cap	section 55(1)(b); section 55(2)(b)	section 90(1); section 90(9) and (10)
Nil cost of rights not purchased	section 55(2)(a)	section 90(3)
Long-term gains rate and the 23 July 2024 comparison	section 112(1) and second proviso to section 112(1)(a)	section 197(1) and (3)
Representative assessee; liability of representative assessee	sections 160, 161(1)	sections 303, 304(1)
Business income of a trust; discretionary trusts	sections 161(1A), 164	section 307
AOP with indeterminate shares	section 167B	section 311
Deduction under a specified agreement	section 194-IC	section 393(1), Table serial 3(ii)
Special Bench reference	section 255(3)	section 364(4)
Carry forward of 1961 capital losses	section 74	section 536(2)(n)
Repeal and savings; registrations continue	(not applicable)	section 536(2)(j)

The 2025 Act references were checked against that Act’s text on the Income Tax Department’s website, with the Act field read on each page.

This note is general commentary on the law as at 24 October 2026 and is not advice on any matter. The position in a particular case depends on its own facts.