Deemed transfer under section 2(47)(v) requires proof of possession in part performance; later conveyance arrangements controlled taxability.

Capital gains were held taxable where the assessees could not prove delivery of possession in part performance of an earlier agreement. The Court found no reliable material to show that the promoter obtained possession in November 1991 so as to attract section 53A of the Transfer of Property Act and the deeming transfer under section 2(47)(v) of the Income-tax Act. The earlier agreement was not matched by the later power of attorney, while the tripartite arrangement of 27.10.1994 evidenced the effective transfer of the larger undivided share. On that basis, the transaction fell outside section 53A and the gains were assessable in the assessees' hands.

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Issues: Whether capital gains arose in the hands of the assessees on the facts proved, having regard to the alleged transfer of possession and the applicability of section 53A of the Transfer of Property Act and section 2(47)(v) of the Income-tax Act.

Analysis: The agreement of 23.10.1991 was not supported by a corresponding reference in the power of attorney executed on 5.11.1991. The documents showed that the power of attorney holder was authorised to deal with the property and later entered into the tripartite arrangement of 27.10.1994, under which the balance undivided share was agreed to be conveyed to the purchaser. On the record, the Court found no reliable material to establish that possession had been handed over to the promoter in November 1991 in part performance of the earlier agreement so as to attract section 53A of the Transfer of Property Act and the deeming transfer under section 2(47)(v) of the Income-tax Act. The Court held that the later agreement, and not the earlier alleged arrangement, evidenced the effective transfer for the larger share of the property.

Conclusion: The assessees failed to bring the transaction within section 53A of the Transfer of Property Act, and the capital gains were assessable in their hands; the Revenue succeeded.

Ratio Decidendi: A deemed transfer under section 2(47)(v) of the Income-tax Act arises only where possession is shown to have been delivered in part performance of a written agreement satisfying section 53A of the Transfer of Property Act; absent such proof, later conveyance arrangements govern the taxability of the transaction.

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