Unregistered joint development agreement did not trigger deemed transfer, so capital gains could not be taxed on hypothetical consideration.

An unregistered joint development agreement does not attract the deeming transfer rule under Section 2(47)(v) of the Income-tax Act unless the requirements of Section 53A of the Transfer of Property Act are satisfied, including possession in part performance as a transferee. On the facts noted, possession was only as a licencee for development, so the arrangement was treated as a pro rata transfer of land and not a statutory transfer for capital gains purposes. Capital gains could not be levied on remaining land or on consideration not yet received, and once that issue was resolved, the Section 54F exemption question became academic.

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Issues: (i) Whether the transaction under the joint development arrangement constituted a transfer exigible to capital gains tax under Section 2(47)(v) of the Income-tax Act, 1961 read with Section 53A of the Transfer of Property Act, 1882. (ii) Whether capital gains could be levied on the remaining land and on consideration not yet received, and whether the exemption question under Section 54F survived.

Issue (i): Whether the transaction under the joint development arrangement constituted a transfer exigible to capital gains tax under Section 2(47)(v) of the Income-tax Act, 1961 read with Section 53A of the Transfer of Property Act, 1882.

Analysis: The arrangement and the connected sale deeds showed only a pro rata transfer of land. Possession, if any, was found to have been given only as a licencee for development and not in part performance as a transferee. Since the joint development agreement was unregistered and executed after the relevant date, the ingredients of Section 53A were not satisfied and the deeming provision in Section 2(47)(v) did not apply.

Conclusion: The transaction was not a transfer chargeable under Section 2(47)(v) of the Income-tax Act, 1961.

Issue (ii): Whether capital gains could be levied on the remaining land and on consideration not yet received, and whether the exemption question under Section 54F survived.

Analysis: In view of the cancellation of the joint development agreement, no further amount had been received and the remaining land was not capable of performance in the circumstances noticed. The issue of capital gains having been decided in favour of the assessee, the question of exemption under Section 54F no longer required adjudication and had become academic.

Conclusion: Capital gains could not be fastened on the remaining land or on hypothetical future receipt, and the Section 54F issue did not survive.

Final Conclusion: The appeal was disposed of in the same terms as the earlier decision, resulting in relief to the assessee.

Ratio Decidendi: Where an unregistered joint development agreement does not satisfy the essential requirements of Section 53A of the Transfer of Property Act, 1882, the deeming transfer provision in Section 2(47)(v) of the Income-tax Act, 1961 is not attracted, and capital gains cannot be assessed on unreceived or merely hypothetical consideration.

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