Deemed transfer through development agreement triggers capital gains where control and accrued consideration pass without a conventional conveyance.

A development arrangement supported by allied resolutions and an irrevocable power of attorney was treated as a deemed transfer because the developer obtained control, development, mortgage, sale and enjoyment rights over the property. On that basis, capital gains were held taxable in the year of the arrangement, and both amounts received and amounts accrued under the deal formed part of the consideration. The challenge to reassessment under section 148 failed, as no infirmity was found in the assumption of jurisdiction. The claim for deduction under section 54F was denied for failure to satisfy the statutory conditions. The additions and reassessment action were sustained.

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Issues: (i) Whether the reassessment proceedings under section 148 of the Income-tax Act, 1961 were valid, (ii) whether execution of the joint development agreement and related powers created a transfer attracting capital gains tax under sections 45 and 2(47)(v) and 2(47)(vi) of the Income-tax Act, 1961 read with section 53A of the Transfer of Property Act, 1882, and (iii) whether deduction under section 54F of the Income-tax Act, 1961 was admissible.

Issue (i): Whether the reassessment proceedings under section 148 of the Income-tax Act, 1961 were valid.

Analysis: The reassessment challenge was examined and the appellate authority's view on initiation of proceedings was found to be well reasoned. No infirmity was found in the assumption of jurisdiction.

Conclusion: The reassessment proceedings were upheld and the challenge failed.

Issue (ii): Whether execution of the joint development agreement and related powers created a transfer attracting capital gains tax under sections 45 and 2(47)(v) and 2(47)(vi) of the Income-tax Act, 1961 read with section 53A of the Transfer of Property Act, 1882.

Analysis: The agreement, allied resolutions and irrevocable power of attorney were treated as effecting a deemed transfer because the developer obtained rights of control, development, mortgage, sale and enjoyment over the property. The consideration was held to include both amounts received and amounts accrued under the arrangement. The subsequent termination plea and objection based on non-registration were rejected, and the provisions were applied on the footing that the transaction fell within the expanded statutory concept of transfer.

Conclusion: Capital gains were held taxable in the year under appeal and the additions were sustained.

Issue (iii): Whether deduction under section 54F of the Income-tax Act, 1961 was admissible.

Analysis: The claim for deduction was not accepted because the assessee failed to establish satisfaction of the statutory conditions, and in one case no proper ground was raised for adjudication.

Conclusion: Deduction under section 54F was denied.

Final Conclusion: The appeals were dismissed, and the additions and reassessment action were sustained on the footing that the joint development arrangement resulted in a taxable transfer in the relevant assessment year.

Ratio Decidendi: For capital gains purposes, a development arrangement accompanied by irrevocable rights, possession or effective control, and accrued consideration can amount to a deemed transfer even without execution of a conventional conveyance, and the whole of the received and accrued consideration is taxable in the year of transfer.

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