Transfer by part performance, compulsory depreciation, and VRS expense treatment were clarified in this ITAT Delhi note.

A written transfer agreement, substantial consideration, delivery of possession, and unrestricted enjoyment by the transferee were treated as sufficient for transfer by part performance under section 2(47)(v) read with section 53A, so capital gains arose in the relevant year. Depreciation could not be compulsorily allowed where the assessee had not claimed it for that year. Voluntary retirement scheme expenditure incurred to rationalise the workforce and support business operations was held to be revenue in nature, not capital, and was allowable under section 37(1) as commercial expenditure.

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Issues: (i) whether the seven-acre parcel was transferred during the relevant previous year so as to attract capital gains tax under section 2(47)(v); (ii) whether depreciation could be thrust upon the assessee though not claimed; (iii) whether voluntary retirement scheme expenditure was capital or revenue in nature.

Issue (i): whether the seven-acre parcel was transferred during the relevant previous year so as to attract capital gains tax under section 2(47)(v).

Analysis: The agreement showed a written contract for transfer, payment of substantial consideration, handing over of possession and unrestricted use of the land by the transferee. The pending acquisition notification did not negate the arrangement because the parties contemplated release from acquisition and the assessee had already enabled enjoyment of the property. These features satisfied the ingredients of transfer by part performance within section 2(47)(v) read with section 53A of the Transfer of Property Act, 1882.

Conclusion: The land was transferred during the relevant previous year and capital gains were taxable in that year, in favour of Revenue.

Issue (ii): whether depreciation could be thrust upon the assessee though not claimed.

Analysis: For the assessment year in question, the Tribunal followed its own earlier decision in the assessee's case and held that the amended regime did not permit compulsory allowance of depreciation where it had not been claimed by the assessee. The decisions relied upon by the Revenue were not accepted as altering the binding view already taken on the issue for the relevant year.

Conclusion: Depreciation could not be compulsorily allowed, in favour of the assessee.

Issue (iii): whether voluntary retirement scheme expenditure was capital or revenue in nature.

Analysis: The expenditure was incurred under a voluntary retirement scheme to rationalize the workforce and facilitate business operations. It did not bring into existence a capital asset or enduring advantage of a capital nature. Section 35DDA was not applicable to the assessment year, and the payment was treated as incurred on grounds of commercial expediency and allowable under section 37(1).

Conclusion: The voluntary retirement scheme expenditure was revenue expenditure and allowable, in favour of the assessee.

Final Conclusion: The appeal succeeded on the capital gains issue, failed on the depreciation issue, and failed on the voluntary retirement scheme issue, resulting in a partial relief to Revenue overall.

Ratio Decidendi: Where a written agreement, part payment, delivery of possession, and transfer of enjoyment exist, transfer under section 2(47)(v) is complete despite deferred registration; depreciation cannot be thrust upon the assessee for the relevant year on the view applied here; and voluntary retirement payments made for business restructuring are revenue expenditure unless they create a capital asset or enduring capital advantage.

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