Development agreement receipts were not sale consideration for land transfer, and the income addition was deleted.

Amount received under a development agreement was not treated as sale consideration for transfer of land because the arrangement was for development of the project and protection of the parties' rights, not a conveyance of the land. The land continued as stock-in-trade, so Section 53A of the Transfer of Property Act did not apply, and the security deposit was recorded only as a liability rather than consideration for transfer. Section 28(va) of the Income-tax Act also did not apply because the receipt was not for refraining from any competing activity. The addition made by the lower authority was deleted.

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Issues: Whether the amount received under the development agreement could be treated as sale consideration for transfer of land and taxed as business profit.

Analysis: The development agreement was found to be entered into for development of the project and protection of the parties' rights, not as a conveyance of the land. The land remained stock in trade, so the doctrine under Section 53A of the Transfer of Property Act, 1882 was held inapplicable. The agreement only gave the developer permission to develop the project and an option to purchase the land separately. The security deposit was recorded as a liability and was not treated as consideration for transfer. Section 28(va) of the Income-tax Act, 1961 was also held not applicable because the receipt was not for refraining from a competing activity.

Conclusion: The amount received under the development agreement was not taxable as sale consideration for transfer of land, and the addition sustained by the lower authority was deleted in favour of the assessee.

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