Development agreement possession controls transfer test for capital gains when effective handing over occurs later

A development agreement will not amount to a transfer under Section 2(47)(v) read with Section 53A unless possession is actually handed over and the transferee obtains the relevant control contemplated by the arrangement. On the facts described, possession was not delivered in the relevant assessment year, the assessee retained control over the property, and later agreements modified the original arrangement. Capital gains were therefore found to arise only in the later year when the operative arrangement changed, not in assessment year 2003-04.

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Issues: Whether handing over of possession under the development agreement amounted to a transfer within the meaning of Section 2(47)(v) of the Income-tax Act, 1961 read with Section 53A of the Transfer of Property Act, 1882 so as to attract capital gains in assessment year 2003-04.

Analysis: The factual findings recorded below showed that possession had not in fact been delivered to the developer in the relevant assessment year. The agreement only enabled development, while control over the property remained with the assessee, including the circumstances relating to the construction licence and occupancy certificate. The earlier agreement was also modified by subsequent agreements, and the capital gains liability was found to arise only in the later assessment year when the operative arrangement changed. These findings were based on interpretation of the agreements and appreciation of the material on record, not on any pure question of law.

Conclusion: The arrangement did not constitute a transfer under Section 2(47)(v) read with Section 53A of the Transfer of Property Act, 1882 in assessment year 2003-04, and the capital gains could not be assessed in that year.

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