Joint development arrangement as transfer: capital gains taxed when developer received effective control, possession rights, and irrevocable authority.

A joint development arrangement was treated as a transfer under section 2(47) because the developer received development rights, possession for effective control, and an irrevocable power of attorney enabling entry, sale, mortgage, and exploitation of the property. The Tribunal applied the principle that section 45 read with section 48 taxes capital gains in the year of transfer on the full value of consideration received or accruing, including cash and flats. Non-registration and later implementation difficulties did not prevent a deemed transfer once material rights had been conferred. The long-term capital gains were therefore assessable in the assessee's hands in the relevant year.

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Issues: Whether the long-term capital gain arising from the joint development arrangement was taxable in the assessee's hands in the relevant assessment year, and whether the transfer of rights and possession under the development agreement and irrevocable power of attorney amounted to transfer within the meaning of section 2(47) of the Income-tax Act, 1961.

Analysis: The arrangement vested the developer with development rights, control over the property, power to enter upon the land, mortgage, sell, amalgamate, and otherwise exploit the project, coupled with an irrevocable special power of attorney. The consideration comprised both cash and flats, and the agreement showed that the members acquired enforceable rights to receive the agreed consideration upon execution of the arrangement. The Tribunal applied the settled principle that for capital gains, section 45 operates with section 48 so that the full value of consideration received or accruing is taxable in the year of transfer. It further followed the view that clause (v) of section 2(47) is attracted where possession, even if not exclusive, is given so as to enable the transferee to exercise effective control in part performance of the contract, and that non-registration or later difficulties in implementation do not displace the deemed transfer once the material rights have been conferred.

Conclusion: The transfer was held to have taken place through the development arrangement and irrevocable power of attorney, and the capital gains were rightly assessed in the assessee's hands in the relevant year.

Final Conclusion: The appeal failed and the addition of long-term capital gains was sustained.

Ratio Decidendi: Where a development agreement confers effective control and rights of enjoyment over immovable property together with an irrevocable authority to deal with it, the transaction constitutes a transfer under section 2(47) and the entire consideration received or accruing is chargeable to capital gains tax in the year of such transfer.

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