Joint development agreement and capital gains: no transfer arose absent possession, while stock-in-trade conversion in 1992 stood confirmed.

A joint development agreement did not amount to a transfer of factory land in assessment year 2000-01 because possession was not handed over, construction had not commenced, and the consideration was only a refundable advance contingent on performance. The land was also held to have been converted into stock-in-trade in 1992 on the basis of board and shareholder resolutions, development steps, and applications for change of user, and that factual finding was not shown to be perverse. The revenue therefore failed to establish any perversity in the concurrent findings, and no substantial question of law arose for interference.

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Issues: (i) Whether the joint development agreement resulted in a transfer of the factory land attracting capital gains in the assessment year 2000-01. (ii) Whether the factory land was converted into stock-in-trade in the year 1992.

Issue (i): Whether the joint development agreement resulted in a transfer of the factory land attracting capital gains in the assessment year 2000-01.

Analysis: The landowner had been restrained by orders of the Industrial Court and the High Court from disposing of the factory land. The authorities below found that no possession was handed over under the agreement, no construction activity commenced during the year in question, and the amount received was only an advance contingent on fulfillment of obligations, with refund stipulated if the obligations were not discharged. These concurrent findings showed that the transaction had not matured into a transfer during the relevant assessment year.

Conclusion: No transfer took place in assessment year 2000-01 and no capital gains arose in that year.

Issue (ii): Whether the factory land was converted into stock-in-trade in the year 1992.

Analysis: The record showed board and shareholder resolutions in 1992 to commence real estate development, induction of directors with relevant experience, steps for change of user, efforts before the urban land ceiling authorities, and eventual permission for development. On those facts, the finding that the land was converted into stock-in-trade in 1992 was treated as a factual conclusion, and no perversity was demonstrated.

Conclusion: The conversion of the factory land into stock-in-trade in 1992 stood affirmed.

Final Conclusion: The revenue failed to establish any perversity in the concurrent factual findings, so no substantial question of law arose for interference.

Ratio Decidendi: Concurrent findings of fact on transfer and conversion, unless shown to be perverse, do not warrant interference in an appeal under Section 260A of the Income-tax Act, 1961.

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