Capital gains on agricultural land hinge on real transfer and receipt of consideration, not registration alone.

For capital gains purposes, a registered sale deed is not conclusive where contemporaneous evidence shows that operative transfer and accrual of consideration were subject to a condition precedent. The Tribunal found that the balance sale price was covered by a post-dated or undated cheque, the purchaser's affidavit linked possession to full payment, and the surrounding circumstances showed the transaction was not finally completed on registration alone. Capital gains were therefore not taxable in assessment year 2007-08 on the entire consideration, and taxability had to be examined in the year when the balance amount was actually realised, namely assessment year 2009-10.

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Issues: Whether capital gains from sale of agricultural land were taxable in assessment year 2007-08 on the basis of a registered sale deed where part consideration was paid by post-dated cheque and the parties' documents and surrounding circumstances indicated that possession and full completion were linked to realization of the balance consideration; and, consequently, whether the matter had to be considered in assessment year 2009-10.

Analysis: The sale deed was executed on 20.03.2007, but the record also showed a substantial balance consideration covered by an undated or post-dated cheque, a contemporaneous affidavit of the purchaser stating that possession would be given only on payment of the full amount, and surrounding circumstances indicating that the transaction was not intended to be finally completed until realization of the balance amount. The Tribunal treated the registered instrument as not conclusive where the evidence on record showed that the operative transfer was conditional and that the real test was whether the assessee had in fact transferred the capital asset and accrued the corresponding income in the relevant year. Following the earlier co-ordinate bench decision on identical facts, it held that the revenue could not fasten capital gains in assessment year 2007-08 merely because the sale deed had been registered, and that the question of taxability had to be examined in the year when the balance consideration was actually realized.

Conclusion: Capital gains were not chargeable in assessment year 2007-08 on the entire sale consideration, and the issue was to be examined in assessment year 2009-10 in accordance with law. This conclusion was in favour of the assessee.

Final Conclusion: The additions on account of capital gains for assessment year 2007-08 were deleted, while the connected matters for assessment year 2009-10 were restored or kept open for fresh consideration as directed.

Ratio Decidendi: For capital gains purposes, a registered sale deed is not conclusive if contemporaneous evidence shows that the operative transfer of the capital asset and accrual of consideration were subject to a condition precedent and were completed only upon later realization of the balance sale price.

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