Joint development agreement: handing over possession can trigger transfer, and capital gains may be computed on construction value.

Execution of a joint development agreement coupled with delivery of possession and an irrevocable development right can constitute a transfer under section 2(47)(v) when the landowners have effectively divested possession and control in return for a defined share of constructed area. On that basis, capital gains arise in the year of the agreement. For computation, section 48 applies the full value of consideration actually received or accruing; where the consideration is in kind, the relevant figure is the construction cost or value of the built-up area receivable by the landowners, not a notional fair market value of the land.

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Issues: (i) Whether execution of the joint development agreement and delivery of possession to the developer amounted to a transfer within the meaning of section 2(47)(v) of the Income-tax Act, 1961, giving rise to capital gains in the year of agreement; (ii) Whether, for computing capital gains, the full value of consideration had to be taken as the value of the constructed area to be received by the landowners.

Issue (i): Whether execution of the joint development agreement and delivery of possession to the developer amounted to a transfer within the meaning of section 2(47)(v) of the Income-tax Act, 1961, giving rise to capital gains in the year of agreement.

Analysis: The agreement granted the developer an irrevocable licence to enter upon and develop the property, the owners executed a power of attorney, and the developer was authorised to obtain approvals and to sell its constructed area. The arrangement showed that the owners had divested possession and rights in the land in favour of the developer in exchange for a defined entitlement to constructed area. In such a case, the transfer was complete when possession was handed over and the right to receive the developed area accrued, attracting the charging provisions for capital gains.

Conclusion: Yes. The transaction constituted a transfer under section 2(47)(v), and capital gains were chargeable in the year of the joint development agreement.

Issue (ii): Whether, for computing capital gains, the full value of consideration had to be taken as the value of the constructed area to be received by the landowners.

Analysis: Section 48 requires computation on the basis of the full value of consideration received or accruing as a result of transfer. The provision does not require adoption of fair market value merely because the consideration is in kind. Here, the consideration was the construction cost incurred by the developer for the landowners' share of the built-up area, and that cost represented the real consideration accruing to them. The Assessing Officer's computation on the basis of the construction value was therefore accepted.

Conclusion: The full value of consideration was correctly taken as the cost of construction of the constructed area receivable by the assessee.

Final Conclusion: The Revenue succeeded on the merits, the cross-objection failed, and the assessment made by the Assessing Officer was restored.

Ratio Decidendi: In a joint development arrangement where possession and development rights are irrevocably parted with in exchange for a stipulated share of constructed area, transfer under section 2(47)(v) occurs on execution and handing over of possession, and the consideration for capital gains is the value of the construction or other benefit actually accruing, not a notional fair market value of the land.

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