Capital gains on development agreement not taxable when possession was not delivered in the relevant year.

Capital gains from a development agreement were not taxable in assessment year 2006-07 because the transaction did not amount to a transfer in that year. The assessee was to receive monetary consideration and a flat, but the record showed that the money was received later and possession of the property was handed over only in assessment year 2007-08. As delivery of possession had not occurred during the relevant year, the requirements for a transfer under section 2(47) read with section 53A were not met. The addition for assessment year 2006-07 was therefore unsustainable.

---

---

Issues: Whether capital gains arising from the development agreement were taxable in assessment year 2006-07 on the footing that a transfer had taken place in that year.

Analysis: The assessee had entered into a development agreement under which monetary consideration and a flat were to be received. The material on record showed that the monetary consideration was actually received later and possession of the property was handed over only in assessment year 2007-08. In the absence of delivery of possession during the relevant year, the conditions for treating the transaction as a transfer by reference to section 2(47) and section 53A were not satisfied for assessment year 2006-07.

Conclusion: Capital gains were not taxable in assessment year 2006-07, and the addition made for that year was unsustainable.

---