Capital gains on development agreements must be computed only on actual consideration received, with section 54F relief available on the facts.

In a joint development arrangement, capital gains are to be computed only on consideration actually received or accrued on the facts found, not on a notional basis for amounts that had neither been received nor crystallised. On that approach, the reopening and deemed-transfer objections were treated as academic. The assessee's claim for exemption under section 54F was also available once the gains were confined to the actual consideration received, and the relief was allowed.

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Issues: (i) Whether the transfer under the joint development arrangement attracted capital gains only to the extent of consideration actually received by the assessee and whether the provisions relating to deemed transfer applied; (ii) Whether the assessee was entitled to exemption under section 54F of the Income-tax Act, 1961.

Issue (i): Whether the transfer under the joint development arrangement attracted capital gains only to the extent of consideration actually received by the assessee and whether the provisions relating to deemed transfer applied.

Analysis: The assessment of capital gains had to follow the factual and legal position already settled on similar development arrangements. The authorities found that the assessee's taxable gain could not be computed on a notional basis for consideration that was neither received nor crystallised in the manner assumed by the Revenue. The reassessment grounds founded on reopening and deemed transfer were rendered academic once the computation was restricted to the amount actually received under the arrangement.

Conclusion: The issue was decided in favour of the assessee, and capital gains were required to be recomputed only on the amount actually received.

Issue (ii): Whether the assessee was entitled to exemption under section 54F of the Income-tax Act, 1961.

Analysis: Once the capital gains were confined to the actual consideration received, the claim for exemption under section 54F remained available on the facts of the case. The denial made in the order under appeal was not sustained, and the benefit due under the Act was directed to be granted.

Conclusion: The issue was decided in favour of the assessee, and the exemption under section 54F was allowed.

Final Conclusion: The Revenue's appeal failed, while the assessee succeeded on the substantive reliefs concerning computation of capital gains and allowance of section 54F benefit; the reopening challenge was not separately adjudicated as it became academic.

Ratio Decidendi: In a development agreement case, capital gains are to be brought to tax only on the consideration actually accrued or received on the facts found, and once the substantive computation is so determined, ancillary reopening objections may become academic.

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