Conditional development agreement not treated as transfer; capital gains deferred until statutory possession and registration requirements are met.

A development agreement for slum rehabilitation did not constitute a transfer under section 2(47)(v) because the developer's rights were conditional on approvals, the assessee retained physical and exclusive possession, and the agreement was unregistered. As the requirements of section 53A of the Transfer of Property Act and the registration framework were not satisfied, no taxable capital gain arose in the year under review. The advance received under the agreement was likewise not taxable as capital gains in that year and was to be dealt with under section 51 when the capital asset is eventually transferred.

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Issues: (i) Whether the development agreement dated 07.11.2007 resulted in transfer of the assessee's land so as to attract capital gains under section 2(47)(v) of the Income-tax Act, 1961. (ii) Whether the advance of Rs. 10 crores received under the agreement could be taxed as capital gains or otherwise in the year under consideration.

Issue (i): Whether the development agreement dated 07.11.2007 resulted in transfer of the assessee's land so as to attract capital gains under section 2(47)(v) of the Income-tax Act, 1961.

Analysis: The agreement showed that the developer's rights were contingent upon sanction of the slum rehabilitation scheme and issuance of the necessary permissions by the competent authority. The assessee was to remain in physical and exclusive possession until the stipulated approval stage was reached. No sanctioned scheme or letter of intent had been obtained during the relevant year. The document was also found to be unregistered, and the conditions necessary to invoke section 53A of the Transfer of Property Act, 1882, read with section 17(1A) of the Registration Act, 1908, were not satisfied. On these facts, the arrangement was only an enabling step for obtaining approvals and not a completed transfer of the immovable property.

Conclusion: The agreement did not amount to a transfer under section 2(47)(v), and capital gains were not chargeable in the relevant year.

Issue (ii): Whether the advance of Rs. 10 crores received under the agreement could be taxed as capital gains or otherwise in the year under consideration.

Analysis: The amount received was only an advance against the proposed transaction. Since no transfer had occurred during the year, the advance could not be brought to tax as capital gains in that year. The appropriate treatment was to deal with it under section 51 of the Income-tax Act, 1961, in accordance with law at the stage when the capital asset is eventually transferred.

Conclusion: The advance was not taxable as capital gains in the relevant year and was to be adjusted in accordance with section 51.

Final Conclusion: The Revenue's challenge failed because the development arrangement had not crystallized into a taxable transfer during the year, and the appeal was dismissed with consequential treatment of the advance under the Act.

Ratio Decidendi: For section 2(47)(v), a taxable transfer arises only when the agreement is of the nature contemplated by section 53A of the Transfer of Property Act, 1882, including effective possession and compliance with the legally required registration framework.

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