Capital gains on a development agreement accrue on completion of transfer under section 2(47), not in a later assessment year.

Capital gains from a development agreement were treated as having accrued in the previous year ending 31.03.2014 because the agreement was executed on 06.11.2013 and the conditions of section 53A of the Transfer of Property Act were recorded as satisfied, completing a transfer within section 2(47) of the Income-tax Act, 1961. On that reasoning, taxation in Assessment Year 2016-17 was unwarranted. Because the gains were held to arise in Assessment Year 2014-15, the assessee's claim for deduction under section 54 did not survive in the year under dispute.

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Issues: Whether the capital gains arising from the development agreement were taxable in Assessment Year 2016-17 or had accrued in Assessment Year 2014-15, and whether the assessee was entitled to deduction under section 54 of the Income-tax Act, 1961.

Analysis: The development agreement was executed on 06.11.2013, and the assessment order itself recorded that the conditions of section 53A of the Transfer of Property Act were satisfied in the previous year ending 31.03.2014. On that basis, the transfer within the meaning of section 2(47) of the Income-tax Act, 1961 was complete in the previous year relevant to Assessment Year 2014-15. The capital gains therefore could not be brought to tax in Assessment Year 2016-17. Since the issue related to the year of accrual itself, the assessee's claim under section 54 did not survive in the impugned year.

Conclusion: The addition made for Assessment Year 2016-17 was not warranted, and the Revenue's appeal failed.

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