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Issues: Whether the transfer of development rights in the plot of land took place in the financial year 2000-01 or in financial year 2009-10, and whether section 50C of the Income-tax Act, 1961 applied to the computation of capital gains.
Analysis: The assessee had, by the offer letter dated 04/10/2000, agreed to grant development rights in respect of the plot, the offer was accepted, consideration was paid in part, and possession of the plot was shown to have been with the builder since 2001. On these facts, the essential ingredients of a contract stood satisfied and the development rights were treated as transferred in the financial year 2000-01. The later registration of the agreement in 2010 did not alter the year of transfer for capital gains purposes. Since section 50C was introduced only with effect from 01/04/2003, it could not govern a transfer that had already taken place in the earlier year.
Conclusion: The transfer was held to have occurred in financial year 2000-01, and section 50C was held to be inapplicable. The issue was decided in favour of the assessee.
Ratio Decidendi: For capital gains purposes, transfer of development rights may occur when contractual rights are created and possession/consideration establish parting with rights in the property, and a later registration does not postpone the year of transfer where the transfer is already complete in substance.
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