Unregistered development arrangement and no effective transfer meant capital gains tax could not arise in the relevant year.

An unregistered and unimplemented joint venture or share transfer arrangement did not amount to a transfer under section 2(47) of the Income-tax Act because it was not a legally enforceable contract under section 53-A of the Transfer of Property Act after the 2001 amendment. Section 2(47)(vi) also did not apply, as the transaction never materialised in substance and did not confer effective possession, consideration, or proprietary rights during the relevant year. As no real transfer and no real income arose in that year, the charging provision under section 45 and the computation mechanism under section 48 were not attracted, and the capital gains addition failed.

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Issues: Whether the joint venture and share transfer arrangement, which remained unregistered and was not acted upon during the relevant financial year, resulted in a transfer within the meaning of section 2(47) of the Income-tax Act, 1961 so as to attract capital gains tax under sections 45 and 48.

Analysis: The decisive question was whether the arrangement had legal efficacy during the relevant year. A transfer under section 2(47)(v) requires a contract capable of enforcement in law under section 53-A of the Transfer of Property Act, and after the 2001 amendment an unregistered agreement does not satisfy that requirement. The deeming provision in section 2(47)(vi) is aimed at a de facto transfer that enables enjoyment of immovable property as a purported owner, but it does not extend to a transaction that never materialised in substance. On the facts accepted by the Tribunal and affirmed here, the permissions and clearances necessary to implement the project were obtained only after the close of the relevant financial year, and there was no effective transfer of possession, consideration, or proprietary rights during that year. Since no transfer giving rise to real income occurred, the charging provision under section 45 and the computation mechanism under section 48 were not attracted.

Conclusion: The arrangement did not constitute a taxable transfer during the relevant financial year, and the capital gains addition could not be sustained.

Final Conclusion: The Revenue's challenge failed because the transaction was not completed or legally enforceable in the relevant year, so no taxable capital gain arose for assessment in that year.

Ratio Decidendi: For capital gains purposes, an unregistered and unimplemented development arrangement does not amount to a transfer unless it is a legally enforceable contract and has actually been given effect so as to generate real income.

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