Permissive possession under a joint development agreement does not trigger deemed transfer or capital gains tax.

Permissive possession under a joint development agreement does not amount to transfer under section 2(47)(v) unless the arrangement satisfies section 53A of the Transfer of Property Act, 1882. Where the developer is treated only as a licensee, the owner retains possession, and the agreement is not intended to operate as delivery of possession in part performance, the essential ingredients of section 53A are absent. In that situation, the deeming fiction in section 2(47)(v) cannot be invoked, so no transfer arises during the relevant year and capital gains are not taxable in the owner's hands.

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Issues: Whether permissive possession given under the joint development agreement amounted to transfer of the property under section 2(47)(v) of the Income-tax Act, 1961 so as to attract capital gains tax.

Analysis: The agreement stated that the developer was only permitted to enter the property as a licensee for development, that the owner would not part with possession, and that the arrangement was not intended to operate as delivery of possession in part performance under section 53A of the Transfer of Property Act, 1882. On a reading of the clauses, the possession retained by the owner was permissive and not legal possession in part performance of a contract of sale. In such circumstances, the ingredients necessary to invoke section 53A were absent, and therefore the deeming provision in section 2(47)(v) could not be applied.

Conclusion: There was no transfer of the property during the relevant year and capital gains were not taxable in the assessee's hands.

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