Joint development agreement and capital gains: transfer fiction under section 2(47)(v) fails without actual possession in part performance.

Section 2(47)(v) applies to a joint development agreement only where possession of immovable property is given in part performance of a contract satisfying section 53A of the Transfer of Property Act, and the transferee has performed or is willing to perform the contract. Here, the agreement expressly stated that the developer's access was not delivery of possession under section 53A, the owner retained possession until performance, and the land was converted and possession handed over only later. On those facts, the transfer fiction did not operate in assessment year 2011-12, so capital gains could not be taxed in that year.

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Issues: Whether capital gains arising from the joint development agreement were assessable in assessment year 2011-12 on the footing that transfer had occurred on the date of the agreement under section 2(47)(v) of the Income-tax Act, 1961 read with section 53A of the Transfer of Property Act, 1882.

Analysis: The transfer provision in section 2(47)(v) applies only where possession of immovable property is allowed to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882. For section 53A to operate, the transferee must have taken possession in part performance and must also have performed or be willing to perform his part of the contract. The joint development agreement in question expressly stated that the permission granted to the developer was not to be construed as delivery of possession under section 53A and that the owner would continue in possession until the contract was discharged by performance. The facts also showed that conversion of the agricultural land into non-agricultural land occurred only on 03.12.2012 and possession was handed over thereafter.

Conclusion: Section 2(47)(v) was not attracted in assessment year 2011-12 and the capital gains could not be taxed in that year.

Ratio Decidendi: A joint development agreement does not amount to transfer under section 2(47)(v) unless possession is actually given in part performance of a contract satisfying section 53A of the Transfer of Property Act, 1882, together with the transferee's performance or willingness to perform the contract.

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