Development agreement possession for construction did not constitute transfer under income-tax law for capital gains purposes.

A development agreement under which the developer was to construct and the owner was to receive a stipulated built-up area did not amount to a transfer for capital gains purposes. The amount mentioned in the agreement was only a refundable performance guarantee, and possession was given only for the limited purpose of development work. On these facts, the requirements of section 53A of the Transfer of Property Act, 1882 were not satisfied, so the transaction did not fall within section 2(47)(v) or section 2(47)(vi) of the Income-tax Act, 1961. The finding that capital gains arose in assessment year 1997-98 was unsustainable.

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Issues: Whether the development agreement and delivery of possession to the developer constituted a transfer within the meaning of section 2(47) of the Income-tax Act, 1961 so as to attract capital gains in assessment year 1997-98.

Analysis: The agreement contemplated a sharing arrangement in which the developer was to construct and the assessee was to receive a stipulated built-up area. The amount referred to in the agreement was only a refundable performance guarantee and not consideration for transfer. The possession handed over under the letter was for the limited purpose of carrying out development work. On these facts, the requirements of section 53A of the Transfer of Property Act, 1882 were not satisfied in the manner necessary to bring the transaction within section 2(47)(v) or section 2(47)(vi) of the Income-tax Act, 1961. The findings recorded by the Tribunal that the entire property had been handed over so as to enable the developer to enjoy 60% of the constructed area and that capital gains arose in assessment year 1997-98 were held unsustainable.

Conclusion: The transaction did not amount to a transfer giving rise to capital gains in assessment year 1997-98, and the questions of law were answered in favour of the assessee.

Ratio Decidendi: Mere handing over of possession under a development agreement for the limited purpose of construction, without transfer for consideration satisfying section 53A of the Transfer of Property Act, 1882, does not constitute a transfer under section 2(47) of the Income-tax Act, 1961.

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