Manohar Reddy Cheruku V. Deputy Commissioner Of Income Tax – Central Circle 1(3). [2025] 181 taxmann.com 407 (Hyderabad – Trib.), Dated 26th November 2025

The ITAT Hyderabad, in this case, held that mere execution of a Joint Development Agreement (JDA) does not by itself trigger capital gains tax unless there is a real “transfer” accompanied by receipt of consideration or transfer of possession in the manner contemplated under the Transfer of Property Act. Rejecting the Assessing Officer’s view that signing the JDA in 2016 constituted a taxable transfer, the Tribunal observed that where the landowner has not received any monetary or non-monetary consideration during the relevant year, no capital gains can be charged.

It further clarified that possession handed over solely for the limited purpose of development, enabling the developer to enter upon the land to carry out construction, does not amount to transfer of possession under Section 53A of the Transfer of Property Act. Following binding judicial precedents, the Tribunal deleted the addition towards long-term capital gains, reaffirming that capital gains under a JDA arise only when consideration is actually received or when possession is transferred in a manner that confers enforceable rights on the developer, and not merely on execution of the agreement.

On merits, the Tribunal further held that licence fees received by the Singapore resident for supply of standardised, off-the-shelf software to Indian customers could not be characterised as Fees for Technical Services (FTS) under Article 12 of the India–Singapore DTAA. Since the licence was non-exclusive, non-transferable, conveyed no copyright rights, and did not “make available” any technical knowledge or skill, the treaty threshold was not met. Relying on the Supreme Court’s ruling in Engineering Analysis, the Tribunal concluded that such receipts are not taxable in India. The decision reinforces two critical principles: strict adherence to digital assessment procedures is mandatory, and software licensing without transfer of IP or technical know-how does not attract FTS taxation under tax treaties.