Summary
Revenue sought capital-gains tax on the full consideration promised under an unregistered joint-development agreement that failed for want of permissions. The Court held that the agreement could not trigger Section 2(47)(v), conferred no ownership-like enjoyment under clause (vi), and generated no accrued right to the unrealised consideration. Tax already paid on separately conveyed parcels was distinguished; Revenue’s appeals were dismissed.
Issues
- Whether an unregistered post-2001 development agreement constituted a transfer under Section 2(47)(v).
- Whether development rights amounted to ownership-like enjoyment under Section 2(47)(vi).
- Whether consideration conditional on unobtained approvals had accrued for capital-gains taxation.
Provisions considered
- Sections 2(47)(v)–(vi), 45 and 48, Income-tax Act, 1961Required an effective part-performance contract, ownership-like enjoyment or real gains arising and consideration received or accrued; the unrealised balance met none of those bases here. (¶¶ 17, 20–29)
- Section 53A; Sections 17(1A) and 49, respectively, after the 2001 amendment, Transfer of Property Act, 1882 and Registration Act, 1908An unregistered agreement executed after the amendment has no effect for Section 53A, subject to the distinct evidentiary uses preserved by Section 49. (¶ 17–20)
Held
- Section 2(47)(v) requires a contract effective in law under Section 53A. After the 2001 amendments, registration is necessary for that purpose. The words referring to a contract of the nature mentioned in Section 53A do not avoid that requirement. As the JDA was unregistered, the Court did not need to decide the disputed possession, licence or readiness-and-willingness questions. (¶ 18–20)
- Section 2(47)(vi) is not confined to changes in cooperative-society membership; it extends to other arrangements effecting a de facto ownership transfer. However, enjoyment must be akin to that of an owner. Here the owner retained ownership and any developer possession served the specific development purpose, so the clause did not apply. (¶ 21–23)
- Income accrues when a right to receive it arises with a corresponding liability to pay. Later instalments depended on approvals that were never obtained and the project failed. The assessees acquired no debt or enforceable right to that income; hypothetical gains could not be taxed under Sections 45 and 48. (¶ 24–28)
- The failed balance of the project was distinct from the 7.7 acres actually conveyed under registered deeds for payments already received and offered to capital-gains tax. The decision did not exempt those completed transactions. (¶¶ 5–6, 14–16, 27–29)
Result
Revenue’s appeals dismissed without costs; the High Court’s conclusion against taxing the unrealised balance was sustained for the Supreme Court’s stated reasons.