Effective transfer on possession controls capital gains holding period; later confirmation deed does not reset long-term status.

Possession delivered under an agreement, together with payment of consideration and supporting documents, was treated as effective transfer in part performance for computing the period of holding under the Income-tax Act. The later registered arrangement was regarded as a confirmatory or intermediary step and did not reset the acquisition date. On that basis, the asset was held from 21.07.2004, so the gain on sale in 2007 was long-term rather than short-term. The assessee was therefore entitled to deduction under section 54F, and the interest levy was only consequential.

---

---

Issues: Whether the assessee was entitled to deduction under section 54F of the Income-tax Act, 1961 by treating the asset as a long-term capital asset, or whether the asset was acquired only in 2007 so as to make the gain short-term and ineligible.

Analysis: The agreement dated 21.07.2004, the handing over of possession, payment of consideration, and the surrounding documentary record showed that the assessee had acquired and enjoyed the property in substance from 2004. The later registered arrangement in 2007 was treated as an intermediary or confirmatory step arising from the dispute and substitution of the plot, and not as the true starting point of ownership. Applying the principle that transfer for capital gains purposes may occur on possession in part performance of a contract, the period of holding was computed from 21.07.2004. The gain arising on sale in 2007 was therefore not a short-term capital gain, and the ancillary levy of interest was only consequential.

Conclusion: The assessee was entitled to deduction under section 54F, and the capital gain was to be treated as long-term, not short-term.

Ratio Decidendi: For capital gains purposes, where possession is delivered and consideration is paid in part performance of an agreement, the date of such effective transfer governs the period of holding, even if a later document is executed for formal or confirmatory purposes.

---