Deemed transfer in development agreements occurs when possession and effective control pass to the developer, not on later completion formalities.

Where immovable property is placed in possession of a developer under a development agreement, section 2(47)(v) of the Income-tax Act, read with section 53A of the Transfer of Property Act, treats the transaction as a transfer when possession and effective control are given in part performance. On the facts, the effective transfer occurred when the developer obtained possession and substantial development rights under the agreement, not on 30.04.2005 when the later completion agreement was executed. The later agreement merely recorded completion and did not defer the earlier deemed transfer, so capital gains were not chargeable on that later date.

---

---

Issues: Whether capital gains arising from transfer of land under a development agreement were chargeable in assessment year 2006-07, and whether the transfer took place on 30.04.2005 or on the earlier date when possession and substantial rights were handed over.

Analysis: The land was dealt with under development agreements executed in 1999, supplemented in 2002, and the builder was placed in possession and given extensive rights for development. Section 2(47)(v) of the Income-tax Act, 1961, read with section 53A of the Transfer of Property Act, 1882, brings within the meaning of transfer a transaction where possession is allowed to be taken or retained in part performance of the contract. On the facts, the effective transfer of the capital asset occurred when the developer obtained possession and control pursuant to the development arrangement, and not when the completion agreement was executed on 30.04.2005. The later completion agreement only formalised completion of the project and did not postpone the earlier deemed transfer.

Conclusion: The capital gain did not arise in assessment year 2006-07 on 30.04.2005. The issue was answered in favour of the assessee and against the Revenue.

Ratio Decidendi: In a development agreement, where possession and effective control of immovable property are given to the developer in part performance, transfer occurs for capital gains purposes under section 2(47)(v) at that point and not on the later completion or formal handover agreement.

---