Unregistered development agreement cannot trigger deemed transfer under capital gains law where section 53A enforcement is unavailable.

An unregistered development agreement executed after the 2001 amendment to the Registration Act could not be enforced under section 53A of the Transfer of Property Act, so the deeming fiction in section 2(47)(v) of the Income-tax Act did not apply. As the alleged handing over of possession under that unregistered arrangement was not a valid transfer of a capital asset, no capital gains arose for the relevant year. The addition towards long-term capital gains was therefore deleted, with the assessee succeeding and the Revenue's challenge failing.

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Issues: (i) Whether an unregistered development agreement coupled with a general power of attorney amounted to a transfer under section 2(47)(v) of the Income-tax Act, 1961 read with section 53A of the Transfer of Property Act so as to attract capital gains tax.

Analysis: The agreement dated 15.01.2007 was not registered. After the 2001 amendment to the Registration Act, an unregistered agreement cannot have effect in law for the purposes of section 53A of the Transfer of Property Act. Where the contract is not capable of enforcement under section 53A, the deeming provision in section 2(47)(v) does not operate. On that basis, the alleged handing over of possession under the unregistered development arrangement could not be treated as a transfer of a capital asset for the relevant year.

Conclusion: The issue was answered in favour of the assessee and against the Revenue. No capital gains arose on the basis of the unregistered development agreement.

Final Conclusion: The addition made towards long-term capital gains was deleted and the assessee's appeal succeeded, while the Revenue's appeal failed.

Ratio Decidendi: An unregistered development agreement executed after the 2001 amendment cannot be enforced under section 53A of the Transfer of Property Act and therefore does not constitute a transfer under section 2(47)(v) of the Income-tax Act, 1961.

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