Section 50C inapplicable to pre-insertion development agreement; possession and contractual terms govern valuation.

Section 50C was treated as inapplicable to a transfer arising from a development agreement executed before that provision came into force. The relevant transaction was analysed as a composite arrangement under the 2000 agreement, so the value could not be substituted by applying a later-enacted deeming provision to an earlier contractual structure. The determining factors were the handing over of possession and the contractual terms, rather than the subsequent registration stage. On that basis, the assessee was entitled to succeed on the applicability of section 50C.

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Issues: (i) Whether section 50C of the Income-tax Act, 1961 applied to a transfer arising from a development agreement entered into before its insertion.

Analysis: The transaction was governed by the development agreement executed in 2000, whereas section 50C was inserted by the Finance Act, 2002 with effect from 01.04.2003. The transfer had to be assessed in the context of the composite arrangement under the agreement, and the value could not be substituted by applying a provision that was not in force when the transaction structure came into existence. The Tribunal also accepted the view that the relevant value was to be determined with reference to the handing over of possession and the contractual terms, not merely the later registration stage.

Conclusion: Section 50C was held to be inapplicable, and the assessee succeeded on this issue.

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