Development agreement possession can trigger capital gains, and enforceable in-kind consideration counts in full value of consideration.

An irrevocable development agreement that grants the developer possession, licence, and effective control over the land is treated as a transfer by part performance, so capital gains tax is attracted under the Income-tax Act. The note further states that where the agreement gives an enforceable right to receive constructed area in kind, that right accrues under the contract and its value forms part of the full value of consideration for computation under section 48. It also distinguishes cases where the original agreement was rescinded and replaced, because the present agreement remained operative and enforceable.

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Issues: Whether handing over possession under the development agreement amounted to a transfer of the capital asset so as to attract capital gains tax, and whether the value of the constructed area agreed to be received in kind could be included in the full value of consideration.

Analysis: The assessee executed an irrevocable development agreement, granted licence and power of attorney to the developer, and the agreement showed that the developer was entitled to enter upon the land and carry out development. The factual matrix and the developer's own reply supported the finding that possession was handed over on the date of the agreement. On these facts, the transaction fell within the scope of transfer by part performance under section 2(47)(v) of the Income-tax Act, 1961 read with section 53A of the Transfer of Property Act, 1882, and section 45 was therefore attracted. For computation under section 48, the right to receive 2000 sq. ft. of constructed area was not contingent or uncertain but had accrued under the agreement itself, and its value formed part of the consideration received or accruing on transfer. The cited precedent was found distinguishable on facts because there the original agreement had been rescinded and substituted, whereas here the agreement remained operative and enforceable.

Conclusion: The transfer was exigible to capital gains, and the value of the constructed area was includible in the full value of consideration. The addition was rightly sustained.

Final Conclusion: The appeal failed on the substantive capital gains issue, and the assessment was upheld.

Ratio Decidendi: An irrevocable development agreement that confers possession or effective control on the developer constitutes a transfer under section 2(47)(v), and any enforceable right to receive consideration in kind accrues for inclusion in the full value of consideration under section 48.

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