Transfer under development agreement requires verified possession before capital gains can be sustained

A development agreement could give rise to long-term capital gains only if the essential ingredients of transfer were established, including verified handing over of possession under section 2(47), read with section 45 and section 53A. The lower authorities had proceeded on the footing that possession was delivered, but the record required factual verification and the appellate order was non-speaking on merits. The matter was remitted to the Assessing Officer for examination of possession and related facts, and the capital-gains addition was not finally sustained.

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Issues: Whether the addition towards long-term capital gains arising from the development agreement could be sustained without a verified finding that possession of the immovable property had in fact been handed over so as to constitute a transfer under section 2(47) read with section 45 and section 53A.

Analysis: The dispute turned on whether the essential ingredients of transfer were satisfied, particularly delivery of possession and accrual of consideration under the development arrangement. The assessee relied on subsequent litigation and surrounding circumstances to contend that possession had not been parted with, while the lower authorities proceeded on the footing that possession had been handed over. The appellate order below was also found to be non-speaking on merits. Since material documents supporting the assessee's stand were not examined at the lower stage, a factual verification was required before the capital gain could be finally upheld or deleted.

Conclusion: The matter was remitted to the Assessing Officer for verification of possession and related facts, and the addition was not finally sustained.

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