Capital gains transfer by possession under part performance taxed when possession passed, not when sale deed was later executed.

Capital gains on sale of factory property were chargeable in assessment year 1998-99 because the written sale agreement, substantial receipt of consideration, and delivery of possession satisfied section 53A of the Transfer of Property Act and brought the transaction within section 2(47)(v) of the Income-tax Act. The existence of a bank mortgage did not stop part performance from operating or defer transfer until the later registered conveyance. For section 45(1), the taxable year is the previous year in which the transfer occurs, so the gain accrued when possession was handed over, not when the sale deed was subsequently executed.

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Issues: Whether capital gains from the sale of the factory property arose in assessment year 1998-99 on delivery of possession under the agreement of sale, notwithstanding that the registered sale deed was executed later after release of the mortgage.

Analysis: The agreement of sale was in writing, consideration was substantially received, and possession of the immovable property was handed over to the purchaser on 31 March 1998. These facts satisfied the requirements of section 53A of the Transfer of Property Act, 1882, so that the transaction fell within section 2(47)(v) of the Income-tax Act, 1961. A mortgage with the bank created only a secured interest and did not prevent the operation of part performance or defer the transfer for capital gains purposes until execution of the registered conveyance. Under section 45(1), the gain is chargeable in the previous year in which the transfer took place.

Conclusion: The transfer took place in assessment year 1998-99, and the capital gain was taxable in that year, not in assessment year 1999-2000.

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