Development agreement not treated as transfer for capital gains when no section 53A possession or completed conveyance existed.

A development agreement for future construction did not, on these facts, amount to a transfer under section 2(47)(v) because the developer received access only for development purposes, no completed construction or accrued share of built-up area arose during the year, and the arrangement did not satisfy the part-performance requirements linked to section 53A of the Transfer of Property Act. The related long-term capital gains addition was deleted. Section 50C also could not apply because there was no completed transfer of land or building in the relevant year; accordingly, stamp valuation could not be substituted for actual consideration.

---

---

Issues: (i) Whether execution of the development agreement amounted to a transfer giving rise to taxable capital gains under section 2(47)(v) of the Income-tax Act, 1961. (ii) Whether the value adopted by the stamp valuation authority could be substituted under section 50C of the Income-tax Act, 1961 in computing capital gains on the development agreement.

Issue (i): Whether execution of the development agreement amounted to a transfer giving rise to taxable capital gains under section 2(47)(v) of the Income-tax Act, 1961.

Analysis: The agreement was for development of land, under which the owner was to receive constructed area in future and no monetary consideration accrued during the relevant year. The developer had been given access only for development purposes, and the record did not show completion of the contemplated construction or receipt/accrual of the assessee's share of constructed area during the year. For section 2(47)(v) to operate, the transaction must amount to possession in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882. On the facts, the arrangement was held to be a development arrangement and not a sale or a transfer producing taxable capital gains in the year under consideration.

Conclusion: The development agreement did not result in taxable transfer in the relevant year, and the addition on account of long-term capital gains was liable to be deleted.

Issue (ii): Whether the value adopted by the stamp valuation authority could be substituted under section 50C of the Income-tax Act, 1961 in computing capital gains on the development agreement.

Analysis: Section 50C applies to transfer of land or building or both. The asset involved here was the development arrangement and related rights, while the land itself was not transferred by way of sale in the relevant year. Since the transaction did not amount to a completed transfer of land or building in the year under consideration, the deeming fiction under section 50C could not be applied to substitute the stamp valuation for actual consideration.

Conclusion: Section 50C was inapplicable, and the addition based on stamp duty valuation could not be sustained.

Final Conclusion: The assessee succeeded on the core capital gains issues, the addition was deleted, and the Revenue's cross appeal failed as it did not survive independently after the assessee's success.

Ratio Decidendi: A development agreement does not give rise to taxable capital gains unless the transaction satisfies the requirements of section 2(47)(v) read with section 53A of the Transfer of Property Act, 1882, and section 50C cannot be invoked unless there is a transfer of land or building or both in the relevant year.

---