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Issues: Whether capital gains arose in the year of execution of the joint development agreement and whether the indexed cost of acquisition was required to be allowed while recomputing the capital gains.
Analysis: The transfer of development rights under the registered joint development agreement was treated as a transfer of a capital asset for purposes of capital gains. The consideration was the constructed area receivable under the agreement, and the date of execution and registration of the agreement was taken as the relevant year for chargeability. The plea that no capital gains arose because physical possession of the constructed area had not yet been received was rejected since the legal control and possession contemplated by section 53A of the Transfer of Property Act, 1882 was found to have passed to the developer. At the same time, the computation adopted by the Assessing Officer did not allow the indexed cost of acquisition, which is necessary for proper computation of capital gains.
Conclusion: Capital gains were held taxable in the relevant year on execution of the joint development agreement, but the matter was sent back for recomputation after allowing indexed cost of acquisition and cost of improvement, if any, resulting in partial relief to the assessee.
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