Agreement to sell is not transfer of immovable property when possession and full consideration are deferred

An agreement to sell could not be treated as the date of transfer of immovable property for claiming capital gains deduction, because only earnest money had been received on that date and the balance consideration was paid later on execution of the sale deed. Since possession had not been delivered before the sale deed and the full sale consideration had not been received earlier, the agreement did not effect a transfer. An agreement to sell does not by itself create any interest in immovable property, so the claimed transfer date was rejected and the deduction was unavailable.

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Issues: Whether the date of agreement to sell could be treated as the date of transfer of immovable property for claiming deduction under section 54 of the Income-tax Act, 1961.

Analysis: The assessee had received only earnest money on the date of agreement, while the balance consideration was received later on execution of the sale deed. The Tribunal's finding was that possession had not been delivered prior to the sale deed and the entire sale consideration had not been received earlier. In these circumstances, the agreement to sell could not be treated as effecting a transfer of immovable property. An agreement to sell does not by itself create any interest in the property under section 54 of the Transfer of Property Act, 1882.

Conclusion: The claimed transfer date based on the agreement to sell was rejected and the deduction under section 54 was held to be unavailable.

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