Joint development agreement with possession can trigger deemed transfer and capital gains under part performance rules.

A joint development agreement was treated as a deemed transfer where the developer was given vacant and peaceful possession, rights to enter and develop the property, and part consideration had already been received. Applying the statutory fiction under section 2(47)(v), read with section 53A of the Transfer of Property Act and section 45 of the Income-tax Act, the transaction was held to fall within part performance even though legal title was conveyed later. Exclusive conveyance or registration was not necessary for the deeming provision to operate, and the resulting capital gains were taxable in assessment year 2005-06.

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Issues: Whether the joint development agreement, coupled with delivery of possession to the developer and receipt of consideration, constituted a transfer within the meaning of section 2(47)(v) of the Income-tax Act, 1961 so as to attract capital gains tax in the assessment year 2005-06.

Analysis: The development agreement conferred rights on the developer to enter upon and develop the property and the assessee had executed a delivery note handing over vacant and peaceful possession. The consideration was not confined to money but included a share in the constructed area, and substantial payments had already been made in the relevant previous year. The statutory fiction in section 2(47)(v), read with section 53A of the Transfer of Property Act, 1882 and section 45 of the Income-tax Act, 1961, was held to cover transactions where possession is allowed in part performance of a contract, even if legal title is transferred later. The Tribunal rejected the contention that only symbolic or limited licence was granted and held that exclusive conveyance or registration was not necessary for the deeming provision to operate.

Conclusion: The transaction amounted to a transfer under section 2(47)(v) of the Income-tax Act, 1961 and the resulting capital gains were taxable in assessment year 2005-06. The finding was against the assessee.

Ratio Decidendi: A development agreement that enables the developer to take possession and exercise effective control over immovable property in part performance of the contract constitutes a deemed transfer under section 2(47)(v) of the Income-tax Act, 1961, and capital gains arise in the year of such transfer notwithstanding deferred receipt of the full consideration or later conveyance of legal title.

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