I signed a joint development agreement before April 2018 and the project completion certificate came much later. Can I claim the benefit of section 45(5A) and defer my capital gain to the completion year?
No. The Patna High Court held that sub-section (5A) of section 45, inserted by the Finance Act 2017 and expressly made effective from 1 April 2018, cannot be treated as retrospective — neither by its express words nor by any necessary intendment. A joint development agreement entered into by an individual or HUF before 1 April 2018 continues to be governed by the pre-amendment law, that is by section 2(47)(v) read with sections 45 and 48, so the gain falls in the previous year in which the transfer was effected.
Decided by the High Court (K. Vinod Chandran, Chief Justice and Madhuresh Prasad J) on 2023-05-12, reported as Civil Writ Jurisdiction Case No. 20926 of 2019 with CWJC Nos. 1774, 2565, 2662, 2766, 3005, 3019, 4796, 4977, 5027, 5065, 5275, 5295 and 6041 of 2020 and CWJC Nos. 15459 and 15554 of 2021 (Patna High Court). It bears on section 45(5A), section 45, section 48, section 2(47)(v), section 53A Transfer of Property Act, 1882, section 147, section 148, section 144 of the Income Tax Act 1961, in Capital Gains, How Tax Law Is Read and Reassessment & Reopening matters.
This is the High Court authority on the dividing line the brief for this area turns on, and it cuts against the taxpayer. Practitioners routinely argue that section 45(5A) is curative — that it removed the hardship of being taxed on a gain before the constructed area is received — and therefore ought to apply to earlier agreements. The Court rejected that on two grounds: the relief was confined to individuals and HUFs, which shows it was a conferral of benefit on two classes rather than a clarification; and being taxed in the year of transfer under the pre-amendment regime was not an unintended consequence. Note also what the Court did NOT decide. It expressly answered only the retrospectivity question and left the merits — whether the JDA materialised, whether possession within section 53A was parted with, whether any income accrued — to be decided on the principles in CIT v Balbir Singh Maini. That is where a pre-2018 taxpayer's real defence usually lies.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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A batch of writ petitions under Article 226 challenged notices under section 148, and in some cases orders under section 144 read with section 147 and the consequent demand notices. The petitioners were individuals and Hindu undivided families who had entered into joint development agreements before 1 April 2018. The single question of law framed was whether sub-section (5A) of section 45, inserted by the Finance Act 2017 with effect from 1 April 2018, applies retrospectively. The petitioners argued that if it is prospective it discriminates under Article 14 between the same class of persons; that it was brought in to remove the unintended consequence of a capital gain being charged on a conjoint reading of sections 2(47)(v), 45 and 48 before any constructed area was received; and that on the merits their agreements had fallen through, relying on CIT v Balbir Singh Maini. They relied on Godrej & Boyce Mfg Co Ltd v DCIT, Allied Motors (P) Ltd, Alom Extrusions and Essar Teleholdings on retrospectivity of curative amendments.
The writ petitions were dismissed — 'The writ petitions are dismissed with the above observations' (paragraph 25). Sub-section (5A) of section 45, inserted by the Finance Act 2017 and expressly stated to be effective from 1 April 2018, cannot be treated as retrospective, by reason of the express words employed and because no intendment can be ferreted out so as to deem it impliedly retrospective (paragraph 24). Where the JDA was entered into before 1 April 2018 the gain remains governed by section 2(47)(v) read with sections 45 and 48 and falls in the previous year in which the transfer was effected (paragraphs 19 and 21). The argument of discrimination under Article 14 was rejected (paragraphs 19 and 22). The Court expressly confined itself to the question of retrospectivity and left every contention on the individual facts — including that the JDA had not materialised, that no consideration passed and that the JDA had become unworkable — to the Assessing Officer or the appellate authority, on the principles in Balbir Singh Maini, granting two months to file objections to notices and three months to file statutory appeals (paragraph 24).
The Court applied the principles on prospectivity summarised at paragraph 65 of the Bombay High Court's judgment in Godrej & Boyce: the operative date is not conclusive, and the Court must examine the scheme before and after the amendment to see whether the change is clarificatory or substantive (paragraphs 10, 12 and 20). Two features showed the amendment to be substantive. First, the benefit of charging the gain in the completion-certificate year was confined to individuals and Hindu undivided families, which 'very clearly indicates that the benefit was intended to be conferred only on two classes of assessees' and works against any claim that it was clarificatory (paragraph 20). Second, being obliged to include the accrued capital gain in the year in which the transfer was effected under section 2(47)(v) was not an unintended consequence but the ordinary operation of the pre-amendment law, so there was no anomaly, blatant error or absurdity of the kind that permits an implied retrospective reading (paragraphs 22 and 24, applying Zile Singh v State of Haryana and Shyam Sundar v Ram Kumar). On Article 14, differentiation by the date on which the JDA was entered into is the natural consequence of an amendment expressly made prospective, and different classes of assessee under the Act are not equals merely because they are assessed under it (paragraph 19). On the merits the Court held that the binding declaration in Balbir Singh Maini is that unless income from capital gains has actually materialised there is no question of assessment in the year of transfer, but that this turns purely on the facts and is for the assessing and appellate authorities (paragraph 6).
we are of the opinion that sub-section (5A) inserted by way of an amendment in the Finance Act, 2017, expressly stated to be effective from 01.04.2018 cannot be treated as retrospective
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Handle my notice → Ask a CA on WhatsAppNo. The Patna High Court held that sub-section (5A) of section 45, inserted by the Finance Act 2017 and expressly made effective from 1 April 2018, cannot be treated as retrospective — neither by its express words nor by any necessary intendment. A joint development agreement entered into by an individual or HUF before 1 April 2018 continues to be governed by the pre-amendment law, that is by section 2(47)(v) read with sections 45 and 48, so the gain falls in the previous year in which the transfer was effected. This was decided by the High Court (K. Vinod Chandran, Chief Justice and Madhuresh Prasad J) and bears on section 45(5A), section 45, section 48, section 2(47)(v), section 53A Transfer of Property Act, 1882, section 147, section 148, section 144 of the Income Tax Act 1961. It is reported as Civil Writ Jurisdiction Case No. 20926 of 2019 with CWJC Nos. 1774, 2565, 2662, 2766, 3005, 3019, 4796, 4977, 5027, 5065, 5275, 5295 and 6041 of 2020 and CWJC Nos. 15459 and 15554 of 2021 (Patna High Court). This is the High Court authority on the dividing line the brief for this area turns on, and it cuts against the taxpayer. Practitioners routinely argue that section 45(5A) is curative — that it removed the hardship of being taxed on a gain before the constructed area is received — and therefore ought to apply to earlier agreements. The Court rejected that on two grounds: the relief was confined to individuals and HUFs, which shows it was a conferral of benefit on two classes rather than a clarification; and being taxed in the year of transfer under the pre-amendment regime was not an unintended consequence. Note also what the Court did NOT decide. It expressly answered only the retrospectivity question and left the merits — whether the JDA materialised, whether possession within section 53A was parted with, whether any income accrued — to be decided on the principles in CIT v Balbir Singh Maini. That is where a pre-2018 taxpayer's real defence usually lies. If it applies to you, the first step is this: Date the agreement first. A specified agreement entered into before 1 April 2018 is outside section 45(5A) and the deferral to the completion-certificate year is not available.
A batch of writ petitions under Article 226 challenged notices under section 148, and in some cases orders under section 144 read with section 147 and the consequent demand notices. The petitioners were individuals and Hindu undivided families who had entered into joint development agreements before 1 April 2018. The single question of law framed was whether sub-section (5A) of section 45, inserted by the Finance Act 2017 with effect from 1 April 2018, applies retrospectively. The petitioners argued that if it is prospective it discriminates under Article 14 between the same class of persons; that it was brought in to remove the unintended consequence of a capital gain being charged on a conjoint reading of sections 2(47)(v), 45 and 48 before any constructed area was received; and that on the merits their agreements had fallen through, relying on CIT v Balbir Singh Maini. They relied on Godrej & Boyce Mfg Co Ltd v DCIT, Allied Motors (P) Ltd, Alom Extrusions and Essar Teleholdings on retrospectivity of curative amendments. The matter was decided on 2023-05-12 by the High Court (K. Vinod Chandran, Chief Justice and Madhuresh Prasad J). On those facts the High Court held as follows. The writ petitions were dismissed — 'The writ petitions are dismissed with the above observations' (paragraph 25). Sub-section (5A) of section 45, inserted by the Finance Act 2017 and expressly stated to be effective from 1 April 2018, cannot be treated as retrospective, by reason of the express words employed and because no intendment can be ferreted out so as to deem it impliedly retrospective (paragraph 24). Where the JDA was entered into before 1 April 2018 the gain remains governed by section 2(47)(v) read with sections 45 and 48 and falls in the previous year in which the transfer was effected (paragraphs 19 and 21). The argument of discrimination under Article 14 was rejected (paragraphs 19 and 22). The Court expressly confined itself to the question of retrospectivity and left every contention on the individual facts — including that the JDA had not materialised, that no consideration passed and that the JDA had become unworkable — to the Assessing Officer or the appellate authority, on the principles in Balbir Singh Maini, granting two months to file objections to notices and three months to file statutory appeals (paragraph 24).
The Court applied the principles on prospectivity summarised at paragraph 65 of the Bombay High Court's judgment in Godrej & Boyce: the operative date is not conclusive, and the Court must examine the scheme before and after the amendment to see whether the change is clarificatory or substantive (paragraphs 10, 12 and 20). Two features showed the amendment to be substantive. First, the benefit of charging the gain in the completion-certificate year was confined to individuals and Hindu undivided families, which 'very clearly indicates that the benefit was intended to be conferred only on two classes of assessees' and works against any claim that it was clarificatory (paragraph 20). Second, being obliged to include the accrued capital gain in the year in which the transfer was effected under section 2(47)(v) was not an unintended consequence but the ordinary operation of the pre-amendment law, so there was no anomaly, blatant error or absurdity of the kind that permits an implied retrospective reading (paragraphs 22 and 24, applying Zile Singh v State of Haryana and Shyam Sundar v Ram Kumar). On Article 14, differentiation by the date on which the JDA was entered into is the natural consequence of an amendment expressly made prospective, and different classes of assessee under the Act are not equals merely because they are assessed under it (paragraph 19). On the merits the Court held that the binding declaration in Balbir Singh Maini is that unless income from capital gains has actually materialised there is no question of assessment in the year of transfer, but that this turns purely on the facts and is for the assessing and appellate authorities (paragraph 6). In the words reproduced by the source cited on this page: "we are of the opinion that sub-section (5A) inserted by way of an amendment in the Finance Act, 2017, expressly stated to be effective from 01.04.2018 cannot be treated as retrospective" The decision followed or applied CIT v. Balbir Singh Maini (2018) 12 SCC 354 — applied on the merits and left to the authorities; Godrej & Boyce Mfg Co. Ltd v. DCIT (2010) 43 DTR 177 (Bombay) — paragraph 65 principles on retrospectivity adopted; Zile Singh v. State of Haryana (2004) 8 SCC 1 — distinguished; Shyam Sundar v. Ram Kumar (2001) 8 SCC 24 — relied on.
It was decided by the High Court on 2023-05-12 and is reported as Civil Writ Jurisdiction Case No. 20926 of 2019 with CWJC Nos. 1774, 2565, 2662, 2766, 3005, 3019, 4796, 4977, 5027, 5065, 5275, 5295 and 6041 of 2020 and CWJC Nos. 15459 and 15554 of 2021 (Patna High Court). Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 45(5A), section 45, section 48, section 2(47)(v), section 53A Transfer of Property Act, 1882, section 147, section 148, section 144, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the department, and it appears in this library for that reason — you need to know what the Assessing Officer will cite against you. The writ petitions were dismissed — 'The writ petitions are dismissed with the above observations' (paragraph 25). Sub-section (5A) of section 45, inserted by the Finance Act 2017 and expressly stated to be effective from 1 April 2018, cannot be treated as retrospective, by reason of the express words employed and because no intendment can be ferreted out so as to deem it impliedly retrospective (paragraph 24). Where the JDA was entered into before 1 April 2018 the gain remains governed by section 2(47)(v) read with sections 45 and 48 and falls in the previous year in which the transfer was effected (paragraphs 19 and 21). The argument of discrimination under Article 14 was rejected (paragraphs 19 and 22). The Court expressly confined itself to the question of retrospectivity and left every contention on the individual facts — including that the JDA had not materialised, that no consideration passed and that the JDA had become unworkable — to the Assessing Officer or the appellate authority, on the principles in Balbir Singh Maini, granting two months to file objections to notices and three months to file statutory appeals (paragraph 24). It arises in Capital Gains, How Tax Law Is Read and Reassessment & Reopening matters, on section 45(5A), section 45, section 48, section 2(47)(v), section 53A Transfer of Property Act, 1882, section 147, section 148, section 144 of the Income Tax Act 1961, and was decided by K. Vinod Chandran, Chief Justice and Madhuresh Prasad J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. For a pre-2018 agreement, shift the argument from section 45(5A) to Balbir Singh Maini: was there a transfer at all under section 2(47)(v) read with section 53A of the Transfer of Property Act, was the agreement registered, was possession parted with or was it a bare licence to construct, and did any right to receive income accrue? Do not run the discrimination argument. The Court held there is no discrimination between assessees who contracted before and after 1 April 2018, and none between individuals and HUFs on the one hand and companies on the other. Where the department seeks to tax the earlier year, check limitation under section 149 before anything else; the Court left the assessees to their statutory remedies rather than deciding the assessments. For agreements from 1 April 2018 onwards, apply section 45(5A) properly — the completion-certificate year, the stamp duty value of the assessee's share plus any cash as full value of consideration, and the proviso that withdraws the deferral if the share in the project is transferred on or before the date of the completion certificate.
Still good law. A citator search on citedby:175847824 returns 15 later decisions. The Bangalore Tribunal applied it in ACIT, Central Circle-2(4) v Lakkanna Durgappa (11 May 2026): at para 32 the Bench wrote 'we also draw support from the decision of Honourable Patna high court in Pankaj Kumar vs Commissioner of Income Tax', adopting the Division Bench's holding that s.45(5A), inserted by the Finance Act 2017 with effect from 1 April 2018, 'cannot be treated as retrospective - both by reason of the express words employed and because no intendment can be ferreted out so as to deem it impliedly retrospective'. A further batch of Bangalore Tribunal orders of 27 August 2026 relies on it as reported at (2023) 333 CTR 242. A Supreme Court-restricted search returned nothing: no special leave petition was found. Nothing overruling, doubting or confining it was found. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The judgment runs to 25 numbered paragraphs and is an oral judgment delivered by the Chief Justice. It reproduces sub-section (5A) with its proviso and Explanation in full at paragraph 14, which is a reliable post-amendment source for the statutory text. Long passages at paragraphs 5, 10, 11 and 23 are quotations from Balbir Singh Maini, Godrej & Boyce, Allied Motors and Zile Singh and are not the Patna High Court's own words. When the ITAT Bangalore later followed this judgment in ACIT v Lakkanna Durgappa it reproduced the passage that appears here at paragraph 19 but numbered it 'para 9'; the numbering in that ITAT order should not be relied on. The CAV date is recorded as 25 April 2023 and the uploading date as 12 May 2023; the judgment itself is dated 12 May 2023. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The writ petitions were dismissed — 'The writ petitions are dismissed with the above observations' (paragraph 25). Sub-section (5A) of section 45, inserted by the Finance Act 2017 and expressly stated to be effective from 1 April 2018, cannot be treated as retrospective, by reason of the express words employed and because no intendment can be ferreted out so as to deem it impliedly retrospective (paragraph 24). Where the JDA was entered into before 1 April 2018 the gain remains governed by section 2(47)(v) read with sections 45 and 48 and falls in the previous year in which the transfer was effected (paragraphs 19 and 21). The argument of discrimination under Article 14 was rejected (paragraphs 19 and 22). The Court expressly confined itself to the question of retrospectivity and left every contention on the individual facts — including that the JDA had not materialised, that no consideration passed and that the JDA had become unworkable — to the Assessing Officer or the appellate authority, on the principles in Balbir Singh Maini, granting two months to file objections to notices and three months to file statutory appeals (paragraph 24).
TaxSphere, “Pankaj Kumar v CIT (Patna High Court) — section 45(5A) is prospective; a joint development agreement signed before 1 April 2018 is taxed in the year of transfer under section 2(47)(v)”, https://taxnotice.vittsphere.com/caselaw/case/pankaj-kumar-v-cit-45-5a-is-prospective-from-1-april-2018/ (validity last checked 2026-09-08)
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My joint development agreement was signed in 2012 and the completion certificate came in the year under assessment. The Assessing Officer has taxed the whole capital gain in this later year by invoking section 45(5A). Can he?
Our JDA was never registered and the project collapsed. Am I still taxed on capital gains?
I have paid for the flat and I am in possession, but the conveyance was never registered. Am I the owner for s.22?
I gave my land to a builder under a JDA. When do I have to pay tax on the capital gain?
