In Brief
Members of a housing society entered a Joint Development Agreement (JDA) with developers for land development, expecting payments and constructed flats. However, the JDA was never registered, and the project failed because regulatory approvals were never obtained. The Income Tax authorities taxed the members on hypothetical capital gains from the unperformed transaction. The Supreme Court held that an unregistered JDA executed after 2001 has no legal effect under Section 53A of the Transfer of Property Act and cannot constitute a taxable 'transfer' of capital assets. Moreover, income from a transaction that never materialized due to failure of conditions precedent is hypothetical and not taxable. No debt or accrued right to receive income arose. The appeals were dismissed, upholding the High Court's decision to set aside the capital gains tax.
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