Limited development possession without consideration does not trigger transfer for capital gains under the Income-tax Act.

A joint development agreement did not amount to a transfer for capital gains purposes where possession was given only to enable the developer to obtain approvals and construct, and no consideration was received during the year of execution. The arrangement was not treated as possession in the nature contemplated by section 53A of the Transfer of Property Act, so the conditions for invoking section 2(47)(v) and charging capital gains under section 45(1) were not satisfied. On that basis, no taxable transfer arose in the relevant year and the long-term capital gains addition was deleted.

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Issues: Whether execution of the joint development agreement, without receipt of consideration and with possession handed over only for the limited purpose of development, amounted to a transfer under section 2(47)(v) of the Income-tax Act, 1961 read with section 53A of the Transfer of Property Act, 1882 so as to attract capital gains tax under section 45(1) of the Income-tax Act, 1961.

Analysis: The possession recorded in the agreement was only for enabling the developer to obtain approvals and undertake construction, and not an absolute transfer in the nature contemplated by section 53A of the Transfer of Property Act, 1882. It was also undisputed that no consideration had been received from the developer during the year of execution of the agreement. In these circumstances, the essential conditions for invoking section 2(47)(v) and charging capital gains under section 45(1) were not satisfied.

Conclusion: No taxable transfer occurred in the relevant year and the addition made on account of long-term capital gains was liable to be deleted in favour of the assessee.

Ratio Decidendi: For a development agreement to constitute a transfer attracting capital gains, possession must be handed over in the manner contemplated by section 53A and consideration must accrue or be received; limited development possession without consideration does not trigger section 2(47)(v) or section 45(1) of the Income-tax Act, 1961.

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