Deemed transfer under capital gains law depends on section 53A conditions, not merely a development arrangement or expected consideration.

A joint development arrangement is treated as a deemed transfer for capital gains only if it satisfies section 53A requirements, including a registered contract where applicable, ascertainable terms, and delivery of possession in part performance. Mere development access or a licence does not amount to such possession, and partial registered sale deeds may indicate that the full transfer has not occurred. Capital gains cannot be brought to tax on a purely notional basis where the balance consideration has not actually accrued and the remaining obligations under the arrangement remain unperformed or incapable of performance. The unconveyed land and unpaid consideration are therefore not taxable as a hypothetical receipt.

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Issues: (i) Whether the joint development arrangement and connected documents amounted to a transfer within the meaning of section 2(47)(v) of the Income-tax Act, 1961 read with section 53A of the Transfer of Property Act, 1882; (ii) whether the requirements of section 53A of the Transfer of Property Act, 1882 were satisfied on the facts, particularly as to registered agreement and delivery of possession; (iii) whether any taxable capital gain arose on the basis of the consideration stipulated under the arrangement though the project was not fully performed and no corresponding income had actually accrued; and (iv) whether the amounts not yet received or the balance land not conveyed could still be brought to tax.

Issue (i): Whether the joint development arrangement and connected documents amounted to a transfer within the meaning of section 2(47)(v) of the Income-tax Act, 1961 read with section 53A of the Transfer of Property Act, 1882.

Analysis: Section 2(47)(v) expands the concept of transfer for capital gains purposes by incorporating transactions that allow possession to be taken or retained in part performance of a contract of the nature referred to in section 53A. The provision is intended to tax such transactions in the year in which they are entered into, but only when the ingredients of section 53A are satisfied. Clause (vi) was found inapplicable because there was no transaction by which the developer became a member of a cooperative society or otherwise acquired enjoyment in the manner contemplated by that clause. Clause (ii) also did not apply because there was no extinguishment of rights in the capital asset through a completed conveyance of the remaining land.

Conclusion: The arrangement did not amount to a taxable transfer of the remaining land under section 2(47)(v) or section 2(47)(vi).

Issue (ii): Whether the requirements of section 53A of the Transfer of Property Act, 1882 were satisfied on the facts, particularly as to registered agreement and delivery of possession.

Analysis: To attract section 53A, there must be a written contract for consideration, signed by the transferor, from which the terms can be ascertained with certainty, followed by delivery of possession in part performance, and willingness on the part of the transferee to perform the contract. After the 2001 amendment, a contract intended to operate under section 53A must be registered, and an unregistered document has no effect for that purpose. On the facts, the joint development agreement was unregistered, possession of the entire land was not proved to have been parted with in part performance, and whatever access was given to the developer was only in the nature of a licence for development. The later conduct of the parties and the pro rata registered sale deeds also showed that the complete transfer had not taken place.

Conclusion: The essential ingredients of section 53A were not met, so section 2(47)(v) could not be invoked.

Issue (iii): Whether any taxable capital gain arose on the basis of the consideration stipulated under the arrangement though the project was not fully performed and no corresponding income had actually accrued.

Analysis: Capital gains taxation cannot proceed on a purely notional or hypothetical basis when income has not in fact accrued. The agreement contemplated further obligations, future approvals, staged payments, and transfer of land only proportionately to the consideration received. The developers defaulted in making further payments, the project was stalled by judicial orders, and the arrangement was ultimately terminated. In those circumstances, no corresponding liability to pay the balance consideration subsisted in a manner that could give rise to real accrual of income on the remaining land.

Conclusion: No taxable capital gain arose on the balance consideration or the remaining land.

Issue (iv): Whether the amounts not yet received or the balance land not conveyed could still be brought to tax.

Analysis: Since the arrangement did not result in a completed deemed transfer of the remaining land and the balance consideration never accrued as real income, taxation of the unsatisfied portion would amount to taxing a hypothetical receipt. The factual matrix showed only partial conveyance against amounts actually received, while the remaining obligations became incapable of performance. The authorities therefore could not tax the balance land value or unreceived consideration for the year in question.

Conclusion: The balance land and unreceived consideration were not taxable in the assessment year under appeal.

Final Conclusion: The appeals succeeded because the joint development arrangement, read with the registered power of attorney and the surrounding events, did not satisfy the statutory conditions for a deemed transfer of the remaining land, and no real capital gain had accrued on the unsatisfied portion of the transaction.

Ratio Decidendi: For capital gains to arise under section 2(47)(v), the contract must be of the nature referred to in section 53A and must satisfy its essential requirements, including a registered contract where applicable and delivery of possession in part performance; absent those elements, and where the balance consideration has not accrued as real income, the unsold or unconveyed portion cannot be taxed on a hypothetical basis.

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