Section 2(47)(v) requires valid section 53A conditions; no capital gains arise on untransferred land without possession.

Capital gains could not be assessed on untransferred land under a joint development agreement because the conditions of section 53A of the Transfer of Property Act were not met. The developers were not shown to have received possession of the remaining land in part performance, nor were they established as willing and able to perform their contractual obligations. As section 53A was inapplicable, section 2(47)(v) of the Income-tax Act could not deem a transfer for capital gains purposes, and no taxable accrual arose on a hypothetical basis. The addition towards long-term capital gains was therefore deleted.

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Issues: Whether capital gains could be brought to tax on the basis of a joint development agreement where possession of the entire land had not been given in part performance so as to attract section 53A of the Transfer of Property Act, 1882 and consequently section 2(47)(v) of the Income-tax Act, 1961.

Analysis: The issue was covered by the earlier binding decision on identical facts. It was held that, in the absence of transfer of possession of the remaining land in part performance of the development arrangement and where the developers were not shown to be willing and able to perform their contractual obligations, the conditions for application of section 53A were not satisfied. Once section 53A was not attracted, section 2(47)(v) could not be invoked to treat the remaining land as transferred for capital gains purposes. The tribunal also noted that no income could be taxed on a hypothetical basis and that no capital gains had accrued in respect of the land not actually transferred.

Conclusion: The addition towards long-term capital gains was not sustainable and was deleted; the appeal was dismissed against the assessee.

Ratio Decidendi: For capital gains to arise under section 2(47)(v), the transaction must satisfy the requirements of section 53A of the Transfer of Property Act, 1882, including part performance and the transferee's willingness to perform; absent these conditions, no taxable transfer or accrual of capital gains occurs on the untransferred land.

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