License to develop property does not trigger capital gains; transfer arises only on actual receipt of constructed share.

A development arrangement that merely permits the developer to enter the property as a licensee and construct at its own cost does not amount to a transfer under section 2(47)(v) of the Income-tax Act, 1961 unless possession is transferred in the sense required by section 53A of the Transfer of Property Act, 1882. Where the assessee's consideration is the agreed constructed area and that area is actually received later, capital gains arise only on receipt of the constructed share, not on execution of the agreement. Taxing the gain earlier would wrongly create double taxation on the same transaction.

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Issues: Whether capital gains arose in the assessment year under consideration on execution of the modified joint development agreement, or only when the assessee received the constructed area, and whether there was a transfer within the meaning of section 2(47)(v) of the Income-tax Act, 1961.

Analysis: The agreement showed that the developer was permitted to enter the property only as a licensee for development purposes, while the assessee's consideration was limited to 42.5% of the built-up area to be constructed at the developer's cost. The arrangement did not show transfer of possession in the sense required by section 53A of the Transfer of Property Act, 1882. The constructed area was actually received in June 2017 and the capital gain had already been offered to tax in the later assessment year. On these facts, taxing the same gain in the year of agreement would amount to double taxation. The earlier decision relied upon the same legal distinction between a license to develop and possession amounting to transfer.

Conclusion: No transfer within section 2(47)(v) of the Income-tax Act, 1961 occurred in the year of the agreement, and the capital gain was not chargeable in that year. The assessee succeeded on this issue.

Final Conclusion: The addition made towards long-term capital gains for the year under consideration was unsustainable, and the Revenue appeals failed.

Ratio Decidendi: A development arrangement granting only a license to enter and develop property, without transfer of possession as contemplated by section 53A of the Transfer of Property Act, 1882, does not by itself effect a transfer under section 2(47)(v) of the Income-tax Act, 1961; capital gains arise only when the assessee actually receives the agreed consideration or constructed share.

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