Development agreement possession transfer rules prevented capital gains taxation in the impugned year under part performance principles.

Capital gains could not be taxed in the impugned year because the development agreements did not establish a transfer of possession amounting to part performance under section 2(47)(v) of the Income-tax Act read with section 53A of the Transfer of Property Act. The owner's project share was to be identified only after municipal approvals, and delivery of the existing structures was contemplated only after sanction of plans. On the record, the conditions for handing over possession in the statutory sense were not met in the year assessed; if the first agreement governed, the relevant year would have been earlier, and if the second governed, transfer could arise only after later clearances.

---

---

Issues: Whether capital gains could be taxed in the impugned assessment year on the basis that possession of land was transferred to the developer under the development agreements so as to attract section 2(47)(v) of the Income-tax Act, 1961 read with section 53A of the Transfer of Property Act, 1882.

Analysis: The agreements showed that the owner's share in the project was to be identified only after municipal approvals and that delivery of the existing structures was contemplated only after sanction of plans. The record did not establish that the assessee had handed over the property in the sense required for part performance. If the first agreement was treated as operative for transfer, the relevant year would have been an earlier year and not the year in appeal. If the second agreement was treated as operative, the transfer could only relate to a later year after the statutory and municipal clearances. On either view, the Revenue's case that transfer occurred in the impugned year was not sustainable.

Conclusion: Capital gains could not be brought to tax in the impugned assessment year and the addition was not justified.

---