Deemed transfer under capital gains law upheld where development rights and power of attorney gave effective control over property.

Reassessment was upheld where the original return had been processed under section 143(1) and later information indicated transfer of society land to a developer, as fresh material justified reopening under sections 147 and 148. A development agreement with an irrevocable power of attorney was treated as a deemed transfer under sections 2(47)(v) and 2(47)(vi) read with section 53A of the Transfer of Property Act because the developer obtained effective possession, control and development rights; the promised flat component also formed part of the consideration, so capital gains were taxable in the year of the agreement. The gains were assessed in the hands of the individual member, not the society, because the society only facilitated member-wise transfer of rights.

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Issues: (i) Whether the reassessment was valid on the basis of subsequent information and when the original return had only been processed under section 143(1); (ii) Whether the development agreement and irrevocable power of attorney amounted to a transfer attracting capital gains tax in the year of execution, including the value of the promised flat component; (iii) Whether the capital gains arising from the transaction were assessable in the hands of the individual member or in the hands of the society.

Issue (i): Whether the reassessment was valid on the basis of subsequent information and when the original return had only been processed under section 143(1).

Analysis: The return had not been scrutinised under section 143(3), and the Revenue later received information indicating transfer of the society land to a developer. In that situation, reopening was supported by the statutory scheme of sections 147 and 148. The absence of an earlier regular assessment and the receipt of fresh material justified reassessment.

Conclusion: The reopening was held valid and was upheld against the assessee.

Issue (ii): Whether the development agreement and irrevocable power of attorney amounted to a transfer attracting capital gains tax in the year of execution, including the value of the promised flat component.

Analysis: For capital gains, sections 45 and 48 require a transfer of a capital asset and taxation of the full value of consideration received or accruing. Applying section 2(47)(v) and section 2(47)(vi), together with section 53A of the Transfer of Property Act, 1882, the transaction was treated as a transfer because the developer was given effective possession, control, development rights, and authority to deal with the property. The court treated the arrangement as falling within deemed transfer principles, held that exclusive possession was not necessary, and rejected the argument that only amounts actually received could be taxed. It also upheld the valuation of the flat component as part of the consideration.

Conclusion: The capital gains were held taxable in the year of the agreement and the assessee's challenge to the addition failed.

Issue (iii): Whether the capital gains arising from the transaction were assessable in the hands of the individual member or in the hands of the society.

Analysis: The society functioned as a facilitator for its members. The plots were allotted to individual members, the members surrendered their rights to enable the joint development arrangement, and the consideration was fixed and paid member-wise. On that basis, the beneficial owner of the transferred rights was the individual member, not the society.

Conclusion: The capital gains were held assessable in the hands of the individual member and not in the hands of the society.

Final Conclusion: The appeal failed in entirety. The reassessment, the capital gains addition, and the attribution of liability to the assessee were all sustained.

Ratio Decidendi: Where a development arrangement coupled with an irrevocable power of attorney gives the transferee effective possession, control, and enjoyment of immovable property, the transaction constitutes a deemed transfer for capital gains purposes and the full consideration, whether received or accrued, is taxable in the year of transfer; where the society merely facilitates member-wise transfer, the tax incidence falls on the individual members.

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