Deemed transfer under capital gains law requires section 53A conditions, including effective possession and willingness to perform.

A development agreement does not amount to a deemed transfer under section 2(47)(v) unless the requirements of section 53A of the Transfer of Property Act are satisfied. Here, the arrangement was not acted upon, no municipal sanction or development activity had commenced, the stated consideration was only a refundable security deposit, and effective possession had not been handed over. The developer was also not willing to perform its contractual obligations. On those facts, the deeming provision could not be invoked, so long-term capital gains could not be taxed merely because the agreement had been executed.

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Issues: Whether the development agreement and alleged handing over of possession amounted to a transfer of immovable property attracting capital gains under section 2(47)(v) of the Income-tax Act, 1961 read with section 53A of the Transfer of Property Act.

Analysis: The development arrangement had not been acted upon by the developer, no municipal sanction or developmental activity had taken place, and the alleged consideration was only a refundable security deposit. The finding that actual possession had not been effectively handed over and that the developer was not willing to perform its contractual obligations meant that the essential ingredients of section 53A were not satisfied. In the absence of a completed transfer or accrual of sale consideration, the deeming provision in section 2(47)(v) could not be invoked to tax capital gains in the year under appeal.

Conclusion: The addition towards long-term capital gains was rightly deleted and the issue was decided in favour of the assessee.

Ratio Decidendi: For a development agreement to constitute a deemed transfer under section 2(47)(v), the requirements of section 53A must be satisfied, including effective possession and the developer's willingness to perform; absent these conditions, capital gains cannot be brought to tax merely because an agreement was executed.

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