Development agreement as licence only does not trigger capital gains transfer absent section 53A possession transfer.

A development agreement that merely grants a licence to construct does not amount to a transfer under section 2(47)(v) of the Income-tax Act, 1961 unless possession is transferred in part performance under section 53A of the Transfer of Property Act, 1882. On the facts stated, the supplementary agreement and commencement certificate arose in the later assessment year, and the flats forming consideration were handed over and sold only then. Capital gains were therefore not chargeable in assessment year 2012-13, and the addition made on that basis was deleted.

---

---

Issues: Whether capital gains arose in assessment year 2012-13 on execution of the development agreement and supplementary agreement, so as to attract section 2(47)(v) of the Income-tax Act, 1961.

Analysis: The development agreement was entered into in assessment year 2012-13, but the supplementary agreement and the commencement certificate were both in the subsequent assessment year. The consideration was to be received in the form of flats, and those flats were handed over and sold only in assessment year 2013-14. The arrangement, on the facts found, was a permission to develop as a licensee and did not amount to transfer of possession in part performance within the meaning of section 53A of the Transfer of Property Act, 1882. In the absence of such transfer, section 2(47)(v) was not attracted in the year under consideration.

Conclusion: Capital gains did not arise in assessment year 2012-13. The addition made on that basis was unsustainable and was deleted.

Final Conclusion: The taxable transfer, if any, was held to have taken place in the subsequent assessment year when the flats were received and sold, not in the year under appeal.

Ratio Decidendi: A development agreement that only grants a licence to construct, without transfer of possession in part performance under section 53A of the Transfer of Property Act, 1882, does not by itself constitute a transfer under section 2(47)(v) of the Income-tax Act, 1961 for capital gains purposes.

---