Capital gains under development agreement not taxable in the year disputed; accrual arose only on later sale of flats.

Capital gains were not chargeable in the relevant assessment year because the development agreement covered only development rights and the assessee was to receive 35% of the built-up area or its sale value only on later sale of the flats. No sale consideration was received during the year under review, and the assessee herself offered capital gains in later years when the flats were actually sold and consideration accrued. The Court also noted that the assessment had been framed under contradictory provisions, which supported interference with the assessment order. On these facts, the alleged transfer and accrual of capital gains were not established for that year, and deletion of the addition was upheld.

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Issues: Whether capital gains could be brought to tax in the assessment year in question on the basis of the development agreement and whether the assessment order and additions sustained by the lower authorities were liable to be interfered with.

Analysis: The agreement showed that only development rights were arranged and that the assessee was to receive 35% of the built-up area or its sale value on subsequent sale of the flats. The Court noted that no sale consideration was received during the year under consideration and that the assessee herself disclosed and paid capital gains in the later years when the flats were sold and consideration was actually received. The Court also found that the assessment had been framed under contradictory provisions, which supported the cancellation of the assessment order. On these facts, the alleged transfer and accrual of capital gains were not established for the relevant year.

Conclusion: Capital gains were not chargeable in the relevant assessment year, and the Tribunal's deletion of the addition was upheld in favour of the assessee.

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