Unregistered JDA and part-performance principles limited capital gains tax to land actually conveyed by sale deed

An unregistered Joint Development Agreement did not satisfy the ingredients of section 53A of the Transfer of Property Act, so section 2(47)(v) of the Income-tax Act was not triggered for the remaining land. Only the portion actually conveyed through executed sale deeds was recognised as a transfer for capital gains purposes, while the developer's possession of the balance land was treated as permissive possession for development rather than possession in part performance. As a result, capital gains could be assessed only to the extent of the actual transfer, and the claim under section 54F became academic once that issue was resolved.

---

---

Issues: Whether the Joint Development Agreement and allied documents brought about a transfer of the entire land so as to attract capital gains tax under section 2(47) of the Income-tax Act, 1961, and whether the absence of a registered JDA prevented applicability of section 53A of the Transfer of Property Act, 1882 and, in turn, section 2(47)(v) of the Income-tax Act, 1961.

Analysis: The dispute was concluded by following the earlier binding decision on the same development arrangement. The governing principle applied was that for section 2(47)(v) to operate, the arrangement must satisfy the essential ingredients of section 53A of the Transfer of Property Act, 1882. On the facts of the JDA, only a pro-rata transfer in respect of the land actually conveyed by sale deeds was recognised. Possession of the entire land was not found to have been handed over in part performance as transferee possession; at best, the developer's possession was treated as permissive possession for development. Since the JDA was unregistered, the transaction did not fall within section 53A and section 2(47)(v) did not apply to the remaining land. The claim under section 54F was rendered academic once the capital gains issue was answered.

Conclusion: The transfer of the entire land was not established for capital gains purposes, section 2(47)(v) did not apply to the unregistered JDA, and the addition made towards long-term capital gains was not sustainable.

Final Conclusion: The revenue's appeal failed because the assessee was not liable to tax on the remaining land under the disputed JDA beyond the portion already covered by executed sale deeds.

Ratio Decidendi: An unregistered development agreement that does not satisfy the ingredients of section 53A of the Transfer of Property Act, 1882 does not trigger section 2(47)(v) of the Income-tax Act, 1961, and capital gains can arise only to the extent of the actual transfer effected.

---