Deemed transfer in joint development arrangements fixes capital gains in the year possession and control pass, not later registration.

A registered joint development arrangement and accompanying power of attorney were treated as giving the developer effective possession and control in part performance, so the transfer was deemed to occur on the date of that arrangement under section 2(47)(v) read with section 53A. Capital gains were therefore chargeable in the earlier year and not in assessment year 2012-13, and the later registered sale deed did not shift the tax year; the assessee's earlier disclosure did not create an estoppel against the statute. Because no transfer was taxable in assessment year 2012-13, section 50C did not apply for that year, and the section 54G claim was relevant only in the correct year of assessment.

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Issues: (i) Whether capital gains arising from the joint development arrangement and registered general power of attorney were taxable in assessment year 2008-09, and not in assessment year 2012-13; (ii) whether deduction under section 54G was available; (iii) whether section 50C could be applied for valuing the transfer in assessment year 2012-13.

Issue (i): Whether capital gains arising from the joint development arrangement and registered general power of attorney were taxable in assessment year 2008-09, and not in assessment year 2012-13.

Analysis: The registered development agreement and the accompanying general power of attorney conferred wide possessionary and control rights on the developer, including rights to enter the property, carry out development, deal with undivided share, and perform acts necessary for transfer and mutation. On a combined reading, the arrangement amounted to part performance within the meaning of section 53A of the Transfer of Property Act, 1882, attracting the deeming fiction under section 2(47)(v) of the Income-tax Act, 1961. The transfer was therefore treated as having taken place on the date of execution of the joint development arrangement and general power of attorney, with the consequence that capital gains arose in the earlier assessment year and not in the year when the formal sale deed was later registered. The fact that the assessee had itself offered the gain in the later year did not create an estoppel against the statute.

Conclusion: The capital gains were held not taxable in assessment year 2012-13 and were required to be assessed in the earlier year; the issue was decided in favour of the assessee.

Issue (ii): Whether deduction under section 54G was available.

Analysis: The claim under section 54G was considered only for completeness because the capital gain itself was held not taxable in assessment year 2012-13. The entitlement to the deduction was linked to the appropriate assessment year in which the capital gain would be brought to tax.

Conclusion: The claim was held to be available in the appropriate year if and when the capital gain is assessed, and the issue was not adverse to the assessee.

Issue (iii): Whether section 50C could be applied for valuing the transfer in assessment year 2012-13.

Analysis: Since the transfer was held not to have taken place in assessment year 2012-13, the question of adopting stamp duty value under section 50C for that year did not survive. The sale deed executed later was treated as only formalising the developer's existing rights under the earlier development arrangement.

Conclusion: Section 50C was held inapplicable in assessment year 2012-13 and the issue was decided in favour of the assessee.

Final Conclusion: The assessment of capital gains in the later year was set aside, the ancillary challenge to valuation under section 50C failed for want of relevance in that year, and the appeal was allowed.

Ratio Decidendi: Where a registered development arrangement and accompanying power of attorney transfer effective possession and control of immovable property to the developer in part performance, the transfer is deemed to occur on the date of that arrangement for capital gains purposes, and subsequent formal conveyance does not shift the chargeable year.

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