Joint development agreement transfers: capital gains are computed on fair market value at the agreement date, not future construction cost.

For a transfer under a joint development agreement treated as a deemed transfer, capital gains are computed by reference to the fair market value or guidance value of the consideration as on the date of the agreement, not by the future construction cost of the built-up area to be received. The Tribunal applied section 2(47)(v) of the Income-tax Act read with section 53A of the Transfer of Property Act and followed its earlier co-ordinate bench view. It upheld the appellate authority's approach and sustained the assessee's method of computing capital gains on the date-based market value.

---

---

Issues: (i) Whether, for computing capital gains arising from transfer of land under a joint development agreement, the deemed sale consideration is to be taken as the fair market value of the built-up area to be received on the date of the agreement.

Analysis: The Tribunal noted that transfer under the joint development agreement is treated as a transfer for capital gains purposes under section 2(47)(v) of the Income-tax Act, 1961 read with section 53A of the Transfer of Property Act, 1882. It followed the earlier co-ordinate bench view that, for such deemed transfer, the relevant consideration is the market value or guidance value as on the date of the agreement, and not the construction cost of the future built-up area. The Tribunal found no reason to depart from the earlier decision and upheld the approach adopted by the appellate authority.

Conclusion: The deemed consideration for capital gains is to be taken with reference to the fair market value on the date of the joint development agreement, and the Revenue's challenge was rejected.

Final Conclusion: The assessee's method of computing capital gains on the basis of the fair market value as on the date of the joint development agreement was sustained, and the Revenue's appeal failed.

Ratio Decidendi: In a transfer under a joint development agreement treated as a deemed transfer, capital gains are to be computed on the fair market value of the consideration as on the date of the agreement, not on the construction cost of the future built-up area.

---