Lease-cum-sale possession counted from handover date for long-term capital gains treatment.

Possession under a lease-cum-sale arrangement, coupled with part performance under section 53A of the Transfer of Property Act, was treated as conferring beneficial ownership from the date of possession. The holding period was therefore counted from that date, and since it exceeded 36 months the asset qualified as a long-term capital asset under section 2(42) of the Income-tax Act. The statutory concept of transfer under section 2(47)(v) supported that approach, so the capital gains were correctly assessed as long-term capital gains in favour of the assessee.

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Issues: Whether capital gains arising from sale of the residential house were to be assessed as long-term capital gains or short-term capital gains in light of the assessee's possession under a lease-cum-sale arrangement and the statutory concept of transfer.

Analysis: The site was allotted and possession was handed over to the assessee under the lease-cum-sale deed, and the assessee was thereafter treated as enjoying the property in the manner contemplated by part performance. Possession under section 53A of the Transfer of Property Act, 1882 was treated as giving the assessee the beneficial ownership from the date of possession. On that basis, the holding period exceeded 36 months, attracting the definition of long-term capital asset under section 2(42) of the Income-tax Act, 1961. The Tribunal's reliance on the statutory concept of transfer under section 2(47)(v) was upheld.

Conclusion: The capital gains were correctly treated as long-term capital gains, and the issue was decided against the Revenue and in favour of the assessee.

Ratio Decidendi: For capital gains purposes, where possession is handed over under a lease-cum-sale arrangement and the assessee enjoys the property in part performance, the holding period is counted from the date of such possession for determining whether the gain is long-term.

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