Development rights and part possession can trigger capital gains transfer on vesting, even before formal sale deed execution.

Development rights and part possession conferred under a development agreement, supported by an irrevocable power of attorney, supplementary agreement and mutation entries, were treated as an effective transfer from 18.01.1996. The arrangement attracted section 53A of the Transfer of Property Act, 1882 and section 2(47)(v) of the Income-tax Act, 1961, so the later sale deed dated 31.08.2000 only formalised title and did not defer the transfer date for capital gains purposes. On those facts, the compensation received on acquisition was assessable as long-term capital gain, and the Revenue's challenge failed.

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Issues: Whether the rights in the land were effectively transferred on 18.01.1996 or only on the sale deed dated 31.08.2000, and whether the compensation received on acquisition was assessable as long-term capital gain or short-term capital gain.

Analysis: The development agreement, registered irrevocable power of attorney, supplementary agreement, and mutation entries were read together and showed that the assessee had acquired development rights and part possession over the property from 18.01.1996. On those facts, the transaction attracted section 53A of the Transfer of Property Act, 1882 and section 2(47)(v) of the Income-tax Act, 1961. The subsequent sale deed only recorded formal ownership and did not postpone the effective transfer for capital gains purposes.

Conclusion: The effective transfer took place on 18.01.1996, and the compensation was rightly assessable as long-term capital gain. The Revenue's challenge failed.

Final Conclusion: The order of the first appellate authority was upheld and the Revenue's appeal was dismissed.

Ratio Decidendi: Where development rights and part possession are conferred under an agreement and irrevocable power of attorney, the transfer is complete for capital gains purposes on the date such rights are effectively vested, even if the later sale deed records formal conveyance.

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