Capital gains on development agreement arose when possession was handed over, not when constructed flats were later received.

Transfer of land under a development agreement was treated as having occurred when possession was handed over to the developer in part performance of the contract, bringing the transaction within the capital gains transfer provisions. On the undisputed facts, possession passed in the earlier previous year relevant to assessment year 1997-98, so the later receipt of constructed flats did not shift the taxable event to assessment year 2001-02. Capital gains, if any, were therefore not chargeable in assessment year 2001-02.

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Issues: Whether the transfer of land under the development agreement took place in the assessment year 2001-02 so as to attract long-term capital gains tax in that year.

Analysis: The landowner had entered into a written development agreement and handed over possession of the land to the developer in exchange for consideration and a share in the constructed area. The transfer provisions governing capital gains treat as transfer any transaction where possession of immovable property is given in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882. On the undisputed facts, possession was handed over in the earlier previous year relevant to assessment year 1997-98, and the later receipt of the constructed flats did not shift the taxable event to assessment year 2001-02.

Conclusion: The capital gains, if any, were not chargeable in assessment year 2001-02. The revenue's appeal failed.

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