Deemed transfer in development agreements can arise from effective possession and control, triggering capital gains despite unexecuted title.

A development arrangement may trigger deemed transfer under section 2(47)(v) where the developer is given effective possession and control and the ingredients of section 53A of the Transfer of Property Act are satisfied, even if legal title is not formally conveyed. Reopening under sections 147 and 148 is supported where the original return was only processed under section 143(1) and the Assessing Officer records tangible material suggesting escapement of income. Capital-gains quantification may require fresh factual verification where the consideration adopted is not properly supported. Sponsorship expenditure was treated as non-business in nature, while the section 14A disallowance did not survive because it was not pressed.

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Issues: (i) Whether reopening of assessment under sections 147 and 148 was valid; (ii) whether the joint venture arrangement and possession given to the developer amounted to transfer under section 2(47)(v), attracting capital gains; (iii) whether the computation of capital gains required fresh determination; and (iv) whether disallowance of sponsorship expenditure and disallowance under section 14A were sustainable.

Issue (i): Whether reopening of assessment under sections 147 and 148 was valid.

Analysis: The assessment had been completed only by processing the return under section 143(1), and the Assessing Officer recorded reasons based on material showing possible escapement of income. In such a situation, the existence of tangible material and recorded reasons was sufficient to confer jurisdiction, and the reassessment could not be treated as a mere change of opinion. The plea that reasons were not furnished was also rejected on the facts recorded by the Tribunal.

Conclusion: The reopening was held valid, in favour of Revenue.

Issue (ii): Whether the joint venture arrangement and possession given to the developer amounted to transfer under section 2(47)(v), attracting capital gains.

Analysis: The Tribunal examined the development agreement, the general power of attorney, the consideration structure, and the possession and control given to the developer. It held that the ingredients of section 53A of the Transfer of Property Act, 1882 and section 2(47)(v) of the Income-tax Act, 1961 were satisfied because the developer had been put in a position to exercise effective control and act upon the contract, even though legal title had not passed by registered conveyance. The non-registration of the arrangement did not defeat the applicability of the deeming provision on the facts found.

Conclusion: The transaction was held to be a transfer within section 2(47)(v), in favour of Revenue.

Issue (iii): Whether the computation of capital gains required fresh determination.

Analysis: The Tribunal held that the Assessing Officer's method of adopting the security deposit as the sale consideration and the Commissioner (Appeals)' approach based on guideline value were not appropriate on the facts of the case. The proper measure was the cost of construction of the 27% constructed area to be received by the assessee in kind, and that required factual verification. The matter was therefore sent back for limited reworking of consideration and capital gains after giving opportunity to the assessee.

Conclusion: The issue of quantification was remitted to the Assessing Officer for fresh computation.

Issue (iv): Whether disallowance of sponsorship expenditure and disallowance under section 14A were sustainable.

Analysis: The disallowance under section 14A was not pressed and therefore did not survive for adjudication. As to the sponsorship expenditure, the Tribunal agreed that the payment was not wholly and exclusively for business purposes and was in the nature of charity or donation rather than allowable business expenditure.

Conclusion: The sponsorship disallowance was sustained, and the section 14A ground stood dismissed as not pressed.

Final Conclusion: The reassessment was upheld, the deemed transfer finding was affirmed, the capital-gains computation was sent back only for fresh quantification, and the expenditure disallowance was sustained, resulting in a partial allowance of both appeals for statistical purposes.

Ratio Decidendi: Where a developer is put in effective possession and control of immovable property under a development arrangement satisfying the ingredients of section 53A of the Transfer of Property Act, 1882, the transaction constitutes a transfer under section 2(47)(v) of the Income-tax Act, 1961 and capital gains arise in the year of such transfer even if legal title remains unexecuted.

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