Void ab initio land sale cannot create capital gains where no transfer exists in law.

A sale declared null and void under the Gujarat Vacant Lands in Urban Areas (Prohibition of Alienation) Act, 1972 could not give rise to capital gains, because a transaction void ab initio has no legal existence and therefore no effective transfer in law. The Collector had already treated the land sale as void, and that order was not challenged. On those facts, the court held that taxable capital gains could not arise from a non-existent transfer, and the issue was answered against the Revenue.

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Issues: Whether capital gains accrued to the assessee when the purported sale of land was declared null and void under the Gujarat Vacant Lands in Urban Areas (Prohibition of Alienation) Act, 1972.

Analysis: The relevant statute prohibited alienation of vacant land by sale and declared any alienation made in contravention thereof to be null and void. The sale transaction in question had been declared void by the Collector, and that order was not challenged. Once the transaction was void ab initio, there was no effective transfer in the eye of law, and capital gains could not arise from a non-existent transfer.

Conclusion: No capital gains accrued to the assessee from the purported sale, and the question was answered in the affirmative against the Revenue.

Ratio Decidendi: A transaction that is void ab initio and has no legal existence cannot constitute a transfer giving rise to taxable capital gains.

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