Developer arrangement as transfer for capital gains; agreed flat value counted in consideration, and section 54F relief was limited to one house.

An arrangement with a developer was treated as a transfer in part performance where possession was allowed under section 2(47)(v), so capital gains arose on the transfer of the land share. The agreed entitlement to a flat was part of the consideration accruing from that transfer and was includible in the computation under section 48, even though the flat had not yet been handed over. Exemption under section 54F was confined to investment in one residential house, so relief could not be extended to two residential properties. The additions and the restriction of exemption were upheld.

---

---

Issues: (i) whether the arrangement with the developer amounted to a transfer of a capital asset attracting capital gains under section 2(47)(v) of the Income-tax Act, 1961 and whether the agreed value of the flat formed part of the full value of consideration under section 48; (ii) whether exemption under section 54F was allowable in respect of more than one residential house.

Issue (i): whether the arrangement with the developer amounted to a transfer of a capital asset attracting capital gains under section 2(47)(v) of the Income-tax Act, 1961 and whether the agreed value of the flat formed part of the full value of consideration under section 48.

Analysis: The assessee had agreed to transfer her share in land to developers, received cash consideration, and became entitled to allotment of a flat in the project. A transfer under section 2(47)(v) includes a transaction where possession is allowed in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882. On the facts, the land was treated as having been transferred in part performance, and the agreed flat entitlement was part of the consideration accruing from the transfer. Under section 48, the computation of capital gains covers not only amounts actually received but also amounts accruing as a result of the transfer. The plea that the flat value should be excluded because it had not yet been handed over was rejected.

Conclusion: The transaction amounted to a transfer, and the value of the flat rightly formed part of the full value of consideration.

Issue (ii): whether exemption under section 54F was allowable in respect of more than one residential house.

Analysis: The exemption under section 54F is restricted to investment in one residential house. Since the assessee had claimed relief in respect of two residential properties, the authorities below confined the benefit to the eligible flat only. No basis was found to extend the exemption to both properties.

Conclusion: Exemption under section 54F was rightly restricted to one residential house and the assessee was not entitled to relief for both flats.

Final Conclusion: The additions and restriction of exemption were upheld, and the appeal failed in entirety.

Ratio Decidendi: A developer arrangement where possession is given in part performance constitutes a transfer for capital gains purposes, and the agreed monetary and non-monetary consideration accruing from such transfer must be included in computation under section 48; exemption under section 54F is confined to one residential house.

---