Agreement to sell without possession does not trigger capital gains; genuine business expenses and seized-money credit were also recognised.

An agreement to sell did not amount to a transfer for capital-gains purposes because possession was not handed over, ownership remained with the assessee, and there was no relinquishment or extinguishment of rights within section 2(47) read with section 53A of the Transfer of Property Act. Business expenditure supported by cheques, TDS, bills and surrounding commercial facts was treated as allowable, including payments to intermediaries, architect fees, site-levelling and video surveillance charges; only unsupported technical expenditure and earlier-year expenditure were disallowed. Seized money had to be adjusted under section 132B before recomputing interest under sections 234A and 234B. The protective assessment issue was remitted for fresh determination in light of the substantive assessment in another concern.

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Issues: (i) whether an agreement to sell, without transfer of possession or ownership rights, constituted a transfer within section 2(47) so as to attract capital gains; (ii) whether the impugned business-related expenditures, including payments to intermediaries, architect fee, site-levelling charges and video surveillance charges, were allowable or disallowable; (iii) whether the seized amount had to be given credit while computing interest under sections 234A and 234B; and (iv) whether the protective assessment in the assessee's hands could stand when substantive assessment had been made in the hands of another concern.

Issue (i): whether an agreement to sell, without transfer of possession or ownership rights, constituted a transfer within section 2(47) so as to attract capital gains.

Analysis: The agreement reflected only an inchoate arrangement to transfer the property at a future date on stipulated terms. The consideration received was only a small advance, possession was not handed over, and the assessee continued to remain the legal owner. On those facts, there was neither relinquishment of the asset nor extinguishment of rights in the property. The transaction also did not satisfy the requirements of section 2(47), read with section 53A of the Transfer of Property Act, 1882.

Conclusion: The transaction was not a transfer and the capital-gains addition was rightly deleted, in favour of the assessee.

Issue (ii): whether the impugned business-related expenditures, including payments to intermediaries, architect fee, site-levelling charges and video surveillance charges, were allowable or disallowable.

Analysis: The payments to intermediaries were supported by cheques, tax deduction at source, and contemporaneous receipts, and the surrounding facts showed commercial expediency in procuring and completing land transactions in the real-estate business. The architect fee was also supported by bills and receipts and was incurred for consultancy connected with the project. Site-levelling and surveillance expenses were incurred in the course of carrying on the business and were not shown to be fictitious or unrelated to the business; the absence of an express clause in the memorandum of understanding was not decisive. However, the technical expenditure was not supported by proof and was related to earlier years, so no allowance could be granted for the year under appeal. The claim relating to expenditure incurred in an earlier period was therefore rejected, while the other identified business expenditures were held allowable.

Conclusion: The payments to sub-agents, architect fee, site-levelling expenditure and video surveillance charges were allowable, but the technical expenditure and the earlier-year expenditure were not allowable, partly in favour of the assessee.

Issue (iii): whether the seized amount had to be given credit while computing interest under sections 234A and 234B.

Analysis: The seized amount was required to be adjusted in accordance with section 132B, first against existing liabilities and thereafter, if any balance remained, against the tax liability arising from the assessment. Interest under sections 234A and 234B had therefore to be recomputed after giving effect to such adjustment.

Conclusion: Recalculation was directed, in favour of the assessee.

Issue (iv): whether the protective assessment in the assessee's hands could stand when substantive assessment had been made in the hands of another concern.

Analysis: Since substantive assessment had already been made in the hands of the other concern, the matter required examination by the appellate authority to determine in whose hands the addition was ultimately assessable. At that stage, the protective addition could not be finally sustained on the record before the Tribunal and the issue was remitted for appropriate determination.

Conclusion: The matter was remanded for fresh determination, partly in favour of the Revenue for statistical purposes.

Final Conclusion: The Tribunal sustained the deletion of capital gains, allowed most of the business expenditure claims, directed recomputation of interest after adjustment of seized assets, and remitted the protective-assessment issue for fresh adjudication.

Ratio Decidendi: An agreement to sell does not amount to a transfer for capital-gains purposes unless ownership-related rights are actually relinquished or extinguished, and business expenditure incurred for commercial expediency is allowable when supported by the surrounding facts and evidence of genuine incurrence.

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