Development agreement transfer triggers long-term capital gains when substantial land rights pass to the developer, with section 54EC relief allowed.

A development agreement transferring substantial rights in land to a developer can constitute a transfer under the extended definition in section 2(47), including clauses (v) and (vi), so capital gains accrue when the agreement is executed. For capital gains purposes, the later completion certificate or physical possession does not fix the date of transfer where the owner has already parted with significant development and enjoyment rights. On those facts, the consideration from sale of flats was treated as long-term capital gain, and exemption under section 54EC was allowed. Authorities cited by the Revenue were distinguished because they involved different factual settings.

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Issues: Whether the consideration received on sale of flats arising out of a development agreement was chargeable as long-term capital gain or short-term capital gain, and whether exemption under section 54EC was allowable.

Analysis: The land was originally acquired long before the development arrangement. Under the development agreement, the owners transferred substantial rights in the land to the developer, who was given rights of construction, disposal, and enjoyment over the developer's share. The agreement therefore amounted to a transfer within the extended meaning of section 2(47), particularly clauses (v) and (vi), and capital gains accrued when the agreement was entered into. The completion certificate and later physical possession did not determine the date of acquisition for capital gains purposes. The authorities relied upon by the Revenue were distinguishable because the present case concerned transfer of land rights under a development arrangement, not a mere bifurcation between land and superstructure on the facts of those cases.

Conclusion: The receipt of Rs. 15,25,000 was rightly treated as long-term capital gain, and exemption under section 54EC was correctly allowed; the Revenue's challenge failed.

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