Effective possession in part-performance arrangements can trigger capital gains transfer treatment even without registered conveyance.

Effective possession can be inferred from the totality of contemporaneous facts and conduct, including an agreement to sell, a supporting power of attorney, substantial receipt of consideration, authority given to the purchasers to obtain approvals and deal with prospective flat buyers, and admitted demolition of the bungalow. On those facts, the arrangement was treated as part performance under section 53A of the Transfer of Property Act and as a transfer under section 2(47)(v) of the Income-tax Act for capital gains purposes, even though no registered conveyance had yet been executed. The later exchange of letters did not outweigh the surrounding circumstances showing transfer in substance.

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Issues: Whether capital gains on sale of the bungalow were chargeable in the assessment year in question on the footing that possession had been handed over to the vendee within the meaning of section 2(47)(v) of the Income-tax Act, 1961 read with section 53A of the Transfer of Property Act, 1882.

Analysis: The agreement to sell, the contemporaneous power of attorney, receipt of a substantial part of the consideration, the authority given to the purchasers to obtain approvals and deal with prospective flat purchasers, and most importantly the admitted demolition of the bungalow during the previous year, were viewed together as establishing that the purchasers had obtained effective possession before the close of the year. The absence of registered conveyance and the later exchange of letters were held not to outweigh the surrounding circumstances showing transfer in part performance. The arrangement was therefore treated as a transfer for capital gains purposes under the statutory deeming provision.

Conclusion: The issue was decided against the assessee and in favour of the Revenue; the capital gain was rightly assessed in the year under appeal.

Final Conclusion: The appeal failed because the transaction was held to amount to a transfer within the meaning of the deeming provision applicable to part-performance arrangements.

Ratio Decidendi: For capital gains purposes, effective possession may be inferred from the totality of contemporaneous facts and conduct, and a transfer under section 2(47)(v) can be found even before formal registration where the arrangement amounts to part performance under section 53A of the Transfer of Property Act, 1882.

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