Transfer by part performance made capital gains taxable when possession passed under a registered development agreement.

A registered development agreement cum GPA, coupled with irrevocable delivery of possession to the developer, was treated as effecting a transfer by part performance under section 2(47)(v) of the Income-tax Act read with section 53A of the Transfer of Property Act. The supplementary agreement was viewed as continuing the original arrangement rather than cancelling it, so the transfer was taken to have occurred when the original agreement was executed. On that basis, the capital gains were taxable in assessment year 2009-10, and the fact that the addition had been made on a protective basis did not justify its deletion once the transfer had already arisen in the earlier year.

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Issues: Whether capital gains arising from the registered development agreement and delivery of possession were taxable in assessment year 2009-10 on the footing of transfer by part performance and whether the addition made on a protective basis was liable to be deleted.

Analysis: The assessee entered into a registered development agreement cum GPA and possession was irrevocably handed over to the developer. The subsequent supplementary agreement was treated as being in continuity with the original arrangement rather than as an annulment of it. On these facts, the transfer was held to have taken place when the original agreement was executed, attracting the deeming fiction of transfer under section 2(47)(v) of the Income-tax Act, 1961 read with section 53A of the Transfer of Property Act, 1882. The fact that the Assessing Officer had described the addition as protective did not, by itself, justify deletion once the transfer had already occurred in the earlier year.

Conclusion: The capital gains were held taxable in assessment year 2009-10 and the deletion of the addition was reversed, with consequential computation directed in accordance with law.

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