Unregistered agreement to sell did not trigger capital gains transfer, but valuation required a Valuation Officer reference under section 50C(2).
An unregistered agreement to sell, without contemporaneous consideration and without protection under section 53A of the Transfer of Property Act, did not amount to a transfer under section 2(47)(v), so capital gains were not taxable in assessment year 2008-09; they were correctly brought to tax in assessment year 2011-12. Where the stamp valuation was disputed and the earlier agreement created an encumbrance affecting value, section 50C(2) required reference to the Valuation Officer, and the capital-gains computation had to be re-adjudicated on that basis.
Issues: (i) whether capital gains on the sale of land could be taxed in assessment year 2008-09 on the basis of an agreement to sell and alleged handing over of possession, and (ii) whether the matter required reference to the Valuation Officer under section 50C(2) for determining the fair market value, keeping in view the agreement date and the encumbrance created by the sale agreement.
Issue (i): whether capital gains on the sale of land could be taxed in assessment year 2008-09 on the basis of an agreement to sell and alleged handing over of possession.
Analysis: Transfer under section 2(47)(v) requires a transaction falling within the part-performance framework of section 53A of the Transfer of Property Act, 1882. After the 2001 amendments to the Registration Act, an unregistered contract for transfer of immovable property does not confer the protection necessary for section 53A purposes. In the present case, the agreement was unregistered, no consideration was paid on the agreement date, and the assessee itself recognized the transfer in the year of registration. On these facts, the alleged agreement did not complete a transfer in assessment year 2008-09.
Conclusion: The capital gain was rightly chargeable in assessment year 2011-12 and not in assessment year 2008-09.
Issue (ii): whether the matter required reference to the Valuation Officer under section 50C(2) for determining the fair market value, keeping in view the agreement date and the encumbrance created by the sale agreement.
Analysis: Section 50C(2) permits reference to the Valuation Officer where the assessee disputes the stamp valuation adopted as full value of consideration. The existence of an earlier agreement to sell creates a relevant encumbrance and affects the valuation exercise. Since the agreement date, the delayed payment, and the impact of the agreement on value required proper examination, the valuation issue could not be conclusively decided without expert valuation.
Conclusion: The Assessing Officer was directed to make a reference to the Valuation Officer under section 50C(2) and re-adjudicate the capital-gains computation accordingly.
Final Conclusion: The assessee succeeded only on the limited aspect of valuation, while the claim that the transfer belonged to an earlier assessment year was rejected; the matter was sent back for fresh computation after valuation reference.
Ratio Decidendi: An unregistered agreement to sell, without contemporaneous consideration and without protection under section 53A, does not by itself constitute transfer for capital-gains purposes, and where stamp valuation is disputed, the valuation machinery under section 50C(2) must be applied considering the encumbrance created by the prior agreement.
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