Joint development transfer under section 2(47)(v) attracted capital gains; section 45(2) failed, valuation reference remitted.

A joint development arrangement with a registered power of attorney, transfer of possession, and control over the property was treated as a transfer in part performance under section 53A of the Transfer of Property Act, attracting capital gains under section 2(47)(v) of the Income-tax Act; the transfer date was taken as 17.09.2012 and the long-term capital gains addition was sustained. Section 45(2) was held inapplicable because the assessee had not converted the land into stock-in-trade and was not carrying on development business. The separate objection that the Assessing Officer should have referred the valuation dispute to the Valuation Officer under section 50C(2) was remitted for fresh adjudication.

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Issues: (i) Whether transfer of the land under the joint development arrangement took place in the previous year relevant to the assessment year 2013-14 so as to attract capital gains under section 2(47)(v); (ii) whether section 45(2) applied on the plea that the land had been converted into stock-in-trade; (iii) whether the Assessing Officer ought to have referred the valuation dispute to the Valuation Officer under section 50C(2).

Issue (i): Whether transfer of the land under the joint development arrangement took place in the previous year relevant to the assessment year 2013-14 so as to attract capital gains under section 2(47)(v).

Analysis: The arrangement was followed by a registered power of attorney conferring wide powers on the developer to deal with the property, obtain approvals, enter the land, carry out developmental activities and effect conveyance of the developer's share. The owner also handed over the original title deeds and received substantial refundable deposit. On a conjoint reading of the memorandum of agreement, joint development agreement and the registered powers of attorney, the developer obtained possession and control in part performance of the contract, and the transaction satisfied the conditions of section 53A of the Transfer of Property Act, 1882 as applied through section 2(47)(v) of the Income-tax Act, 1961.

Conclusion: The transfer was rightly treated as having taken place on 17.09.2012, and the addition towards long-term capital gains was sustained.

Issue (ii): Whether section 45(2) applied on the plea that the land had been converted into stock-in-trade.

Analysis: The assessee was not carrying on development business; the development activity was undertaken by the developer, while the assessee merely parted with possession and rights in the land under the contract. The facts did not establish a conversion of the capital asset into stock-in-trade by the assessee so as to shift the charge to section 45(2).

Conclusion: Section 45(2) was held inapplicable.

Issue (iii): Whether the Assessing Officer ought to have referred the valuation dispute to the Valuation Officer under section 50C(2).

Analysis: A specific ground on the failure to make a valuation reference was raised, but the appellate authority had not adjudicated it. This issue required fresh examination on the valuation aspect in accordance with law after giving both sides an opportunity.

Conclusion: The matter was remitted for adjudication of the valuation-reference ground.

Final Conclusion: The core addition on transfer under section 2(47)(v) was upheld, while the valuation-reference issue was restored for fresh decision, resulting in partial relief to the assessee.

Ratio Decidendi: In a joint development arrangement, where a registered power of attorney and connected covenants confer possession and effective control on the developer in part performance, the transaction is a transfer under section 2(47)(v), but a distinct objection regarding reference to the Valuation Officer under section 50C(2) must be separately adjudicated.

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