Joint development agreement not a transfer for capital gains where section 2(47)(v) conditions were unmet.

Execution of a registered joint development agreement did not, by itself, amount to a transfer of the capital asset for capital gains purposes. The agreement only authorised the developer to undertake development, obtain approvals, arrange finance and complete construction over four years, while the owner was to receive a 50% share in the built units on completion. As no monetary consideration was paid on execution and the conditions for transfer under section 2(47)(v) of the Income-tax Act read with section 53A of the Transfer of Property Act were not satisfied in the relevant year, capital gains did not arise then and the addition of long-term capital gains was not sustainable.

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Issues: Whether execution of the registered joint development agreement resulted in a transfer of the capital asset so as to attract capital gains tax in the relevant assessment year.

Analysis: The registered development agreement only enabled the developer to carry out development activities, obtain permissions, arrange finance and complete construction over a period of four years. No monetary consideration was paid at the time of execution, and the assessee was to receive only a 50% share in the constructed units upon completion. On these facts, the ingredients of transfer under section 2(47)(v) of the Income-tax Act, 1961, read with section 53A of the Transfer of Property Act, 1882, were not satisfied in the relevant year. Accordingly, capital gains did not arise merely on execution of the agreement.

Conclusion: There was no transfer of the capital asset in the relevant assessment year, and the addition towards long-term capital gains was not sustainable.

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