Licence to develop leased land without conveyance is not a transfer of capital asset for capital gains purposes.

A collaboration arrangement over leasehold land and an existing structure does not, by itself, constitute a transfer of a capital asset under section 2(47) of the Income-tax Act, 1961, where no registered conveyance is executed and the property is not actually conveyed. The arrangement is treated as a permissive licence to enter and construct, not as a sale or lease, and the assessee's substantive rights in the property are not completely extinguished. Amounts received in advance or as security for a contemplated future transfer of yet-to-emerge built-up space do not create capital gains until an effective transfer occurs.

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Issues: Whether the collaboration arrangement and connected agreements resulted in a transfer of a capital asset or extinguishment of rights in the property within the meaning of section 2(47) of the Income-tax Act, 1961, so as to attract capital gains tax.

Analysis: The assessees held leasehold rights in the land and ownership rights in the existing structure. The agreements with the builder did not execute a registered conveyance of the immovable property, and the property itself was not transferred. The arrangement was treated as a licence to enter upon the land and raise a building, not as a sale or lease. The assessees' remaining rights in the property were not completely extinguished, and the builder acquired only a permissive right to construct, while the assessees continued to retain their substantive leasehold interests. Amounts received under the agreements were in the nature of advances or security for a contemplated future transfer of built-up space, which had not yet come into existence.

Conclusion: No transfer of the capital asset had taken place and no capital gains arose in the hands of the assessees.

Ratio Decidendi: A mere collaboration or licence arrangement that permits construction on leased land, without a registered conveyance and without complete extinguishment of the assessee's rights in the property, does not amount to a transfer of a capital asset under section 2(47) of the Income-tax Act, 1961.

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