Development agreement as transfer under capital gains law when possession and part performance satisfy section 53A requirements.

A registered development agreement and supplemental agreement constituted a transfer under section 2(47)(v) of the Income-tax Act read with section 53A of the Transfer of Property Act because they fixed the full consideration, gave the developer possession for development, prohibited revocation, authorised an irrevocable power of attorney, and showed readiness and willingness to perform. The fact that monetary consideration was received later was not decisive, as capital gains accrue in the year of transfer under section 45. On that basis, the transfer was treated as having occurred before the previous year relevant to assessment year 2001-02, so the capital gains were not taxable in that year.

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Issues: Whether the development agreement and supplemental agreement constituted a transfer of the capital asset under section 2(47) of the Income-tax Act, 1961 read with section 53A of the Transfer of Property Act, 1882 in the relevant earlier year, so as to make the capital gains taxable in assessment year 2001-02.

Analysis: The agreements fixed the full consideration, conferred possession on the developer for development purposes, prohibited revocation, authorised an irrevocable power of attorney, permitted the developer to deal with the developed portion, and showed that the transferee was ready and willing to perform its obligations. The arrangement satisfied the requirements of section 53A of the Transfer of Property Act, 1882 and therefore fell within section 2(47)(v) of the Income-tax Act, 1961, with the possibility of also attracting section 2(47)(vi). Receipt of money consideration was not decisive, because capital gains accrue in the year of transfer under section 45 of the Income-tax Act, 1961.

Conclusion: The transfer had taken place before the previous year relevant to assessment year 2001-02, so the capital gains were not taxable in that assessment year.

Ratio Decidendi: Where a registered, irrevocable development agreement places the transferee in possession in part performance and the transferee is ready and willing to perform, the transaction constitutes a transfer under section 2(47)(v) of the Income-tax Act, 1961 read with section 53A of the Transfer of Property Act, 1882, and capital gains arise in the year of such transfer, not in the year of later receipt of consideration.

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