Unregistered development agreement cannot trigger capital gains where section 53A is unavailable and no real accrual arises.

An unregistered joint development agreement executed after the Registration Act amendments could not be treated as a transfer under section 2(47)(v), because section 53A of the Transfer of Property Act was unavailable without registration. The arrangement also did not fall within section 2(47)(vi), as it did not effectively transfer or enable enjoyment of immovable property; the owner retained ownership and only authorised limited development. Capital gains could not be assessed on the unconsummated portion, since the project never materialised and no real accrual of income or enforceable right to consideration arose. The tax demand on the remaining land was therefore unsustainable.

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Issues: (i) Whether an unregistered joint development agreement could amount to a transfer within section 2(47)(v) of the Income-tax Act, 1961 by attracting section 53A of the Transfer of Property Act, 1882; (ii) Whether the transaction fell within section 2(47)(vi) of the Income-tax Act, 1961 as a transfer or enabling of enjoyment of immovable property; (iii) Whether capital gains could be assessed on a transaction that did not materialise and yielded no real accrual of income.

Issue (i): Whether an unregistered joint development agreement could amount to a transfer within section 2(47)(v) of the Income-tax Act, 1961 by attracting section 53A of the Transfer of Property Act, 1882.

Analysis: Section 2(47)(v) applies only where there is a contract capable of being enforced under section 53A of the Transfer of Property Act, 1882. After the 2001 amendments to the Registration Act, 1908, a document containing a contract for transfer for consideration of immovable property must be registered to have effect for section 53A purposes. An unregistered agreement executed after the amendment has no legal efficacy for invoking section 53A, and therefore cannot be treated as a transfer under section 2(47)(v).

Conclusion: The unregistered joint development agreement did not attract section 2(47)(v) and no transfer arose on that basis.

Issue (ii): Whether the transaction fell within section 2(47)(vi) of the Income-tax Act, 1961 as a transfer or enabling of enjoyment of immovable property.

Analysis: Section 2(47)(vi) is meant to cover transactions having the effect of transferring or enabling enjoyment of immovable property in substance, even if title does not pass in law. On the terms of the agreement, the owner continued to remain the owner and had not parted with ownership-like rights in favour of the developer. The arrangement only authorised development for a limited purpose and did not amount to a de facto transfer of ownership enjoyment.

Conclusion: The transaction did not fall within section 2(47)(vi).

Issue (iii): Whether capital gains could be assessed on a transaction that did not materialise and yielded no real accrual of income.

Analysis: Capital gains under sections 45 and 48 arise only when profits or gains result from a transfer and when consideration is received or accrues. Where the project never obtained the necessary permissions and the contemplated development never came to fruition, no real income arose. Tax cannot be levied on hypothetical income, and no debt or enforceable right to receive the balance consideration had come into existence.

Conclusion: No taxable capital gain accrued on the unconsummated portion of the transaction.

Final Conclusion: The appeals failed, the tax demand on the remaining land was unsustainable, and the assessees succeeded on the substantive tax questions.

Ratio Decidendi: For capital gains taxation, an unregistered development agreement that is unenforceable under section 53A cannot constitute a transfer under section 2(47)(v), and a transaction that never matures into a real enforceable accrual of consideration cannot be taxed as capital gains.

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