Conditional development agreement did not trigger deemed transfer for capital gains because possession was not effectively handed over.

A conditional development agreement and power of attorney did not amount to a transfer under section 2(47)(v) of the Income-tax Act because possession was made subject to full payment and sanction of building plans. The developer had not fulfilled those essential conditions, had not obtained plan approval, and the arrangement did not amount to unconditional handing over of possession in part performance. As the requirements of section 53A of the Transfer of Property Act were not satisfied, the deeming fiction for capital gains could not be invoked merely on execution of the documents. No transfer arose in the relevant previous year, and capital gains were not taxable in A.Y. 2009-10.

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Issues: Whether the development agreement and power of attorney executed by the assessee amounted to a transfer of the capital asset under section 2(47)(v) of the Income-tax Act, 1961 so as to attract capital gains in the relevant assessment year.

Analysis: The agreement made transfer of possession and enjoyment conditional upon full payment of the agreed consideration and sanction of building plans. The developer had not complied with those essential conditions, had not obtained plan sanction, and the possession contemplated by the agreement was not an unconditional handing over of control. In such circumstances, the requirements of section 53A of the Transfer of Property Act, 1882 were not satisfied and the deeming fiction under section 2(47)(v) could not be invoked merely because a development agreement and power of attorney were executed.

Conclusion: No transfer took place in the relevant previous year and the amount could not be assessed as capital gains in A.Y. 2009-10. The issue was decided in favour of the assessee.

Ratio Decidendi: A conditional development arrangement does not amount to a transfer under section 2(47)(v) unless possession is effectively handed over in part performance of an enforceable contract and the transferee is ready and willing to perform the essential contractual obligations.

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