Surrender of purchase rights under an agreement to sell can amount to transfer, making compromise consideration taxable as capital gains.

A purchaser's enforceable right under an agreement to obtain conveyance of immovable property is a capital asset within the Income-tax Act. When that right is surrendered in a compromise for monetary compensation, the extinguishment and relinquishment of the right amount to a transfer under the statutory definition. The receipt is therefore chargeable to capital gains tax, and the earlier view that such extinguishment was outside transfer no longer applies after Grace Collis. The Tribunal was thus incorrect in treating the amount as not exigible to capital gains.

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Issues: Whether the amount received on compromise in lieu of giving up the right to claim specific performance of an agreement to purchase immovable property was exigible to capital gains tax as a transfer of a capital asset.

Analysis: The right arising under an agreement for sale to obtain conveyance of immovable property is property of wide import and falls within the expression "capital asset" under section 2(14) of the Income-tax Act, 1961. When the assessee gave up the right to seek specific performance and accepted monetary compensation under the compromise, there was extinguishment and relinquishment of rights in that property. The definition of "transfer" in section 2(47) is expansive and includes extinguishment of rights in a capital asset. The earlier view in Vania Silk Mills no longer governed the field after Grace Collis, and the facts were treated as materially similar to the Bombay decision in Vijay Flexible Containers.

Conclusion: The receipt was a capital receipt exigible to capital gains tax and the Tribunal was not justified in holding otherwise. The answer was therefore against the assessee and in favour of the Revenue.

Ratio Decidendi: A purchaser's enforceable and assignable right under an agreement to obtain conveyance of immovable property is a capital asset, and monetary consideration received for surrendering that right constitutes a transfer by extinguishment or relinquishment within section 2(47) of the Income-tax Act, 1961.

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