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2017 (3) TMI 1168 - AT - Income TaxTransaction of entering into development agreement as transfer within the meaning of section 2(47)(v) - Capital gain - Held that:- We find merit in the argument of the ld.AR that no sale transaction has taken place with the signing of the development agreement as the sale is governed by the provisions of section 54 of the Transfer of Property Act, 1882 wherein the prime determining factor is receipt of monitory consideration. There is no monitory consideration whatsoever in the development agreement entered in to by the assessee and therefore cannot be construed as sale. We also find merit in the argument of the ld. AR that entering development agreement with the Developer, the assessee has not relinquished any interest in the said property as the right in the property continue to belong to the owner. Subsection 3(v)of section 2(47) of the Act is not relevant to the case under consideration and the development agreement nowhere falls under ambit the transaction of allowing possession of immovable property to be taken or part performance of contract of the nature referred to in section 53A of the TPA, 1882 because the development agreement is not an agreement for sale because the assessee executed a contract with the developer and not with the intended purchaser. The development agreement is some sort of business agreement and it basically postulates coming together of two parties only i.e.the developer and the owner of the land. The developer does not have land to develop the land and the assessee did not have sufficient finance to develop the land and therefore they come together i.e. land and finance for the development of project is necessarily business agreement whereby the owner of land allows the developer to enter and exploit the land for the limited purposes of developing the said land. Looking into the provisions of TPA,1882 which clearly shows that allowing the possession to be taken and retained in part performance of the contract could be considered as transfer and not permissible possession or any other kind of possession. We are of the considered view that the order of FAA upholding partly the order of AO levying tax on the LTCG on the basis of development agreement was wrong and cannot be sustained. Accordingly, we set aside the order of the FAA and direct the AO to delete the total addition in the current year. We further hold that the application of provisions of section 50C is also bad in the present scenario as there was no transfer of land or building has taken place. - Decided in favour of assessee.
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