Capital gains transfer by agreement to sell upheld where the transaction enabled enjoyment of immovable property without possession.

An agreement to sell can constitute a transfer of a capital asset under section 2(47)(vi) of the Income-tax Act where, read as a whole, it effectively conveys or enables enjoyment of immovable property; physical delivery of possession is not essential if the transaction places the transferee in control of the property rights, so capital gains were assessable in the relevant year. Rectification under section 254(2) is confined to mistakes apparent from the record, and where the Tribunal has already considered the material and no obvious error is shown, rectification is not available; the rejection of the rectification applications was therefore upheld.

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Issues: (i) Whether the agreement to sell dated 7.9.1991 amounted to a transfer of a capital asset within the meaning of section 2(47)(vi) of the Income-tax Act, 1961 for charging capital gains in assessment year 1992-93. (ii) Whether the Tribunal was justified in rejecting the rectification applications under section 254(2) of the Income-tax Act, 1961 on the ground that no mistake apparent from the record was shown.

Issue (i): Whether the agreement to sell dated 7.9.1991 amounted to a transfer of a capital asset within the meaning of section 2(47)(vi) of the Income-tax Act, 1961 for charging capital gains in assessment year 1992-93.

Analysis: The expression "transfer" in section 2(47) is an inclusive definition and is to be given a wide meaning. Clause (v) was found inapplicable because physical possession was not delivered under the agreement. Clause (vi), however, covers any transaction by way of agreement or arrangement that has the effect of transferring or enabling the enjoyment of immovable property. Reading the agreement as a whole, the co-owners treated themselves as absolute owners, received the consideration, imposed binding obligations on the purchaser to secure permissions and clear disputes, and effectively put the transferee in control of the property rights. The absence of actual delivery of possession did not prevent the transaction from operating as a transfer within the statutory definition.

Conclusion: The agreement dated 7.9.1991 constituted a transfer of a capital asset under section 2(47)(vi), and the capital gains were rightly assessed in assessment year 1992-93.

Issue (ii): Whether the Tribunal was justified in rejecting the rectification applications under section 254(2) of the Income-tax Act, 1961 on the ground that no mistake apparent from the record was shown.

Analysis: The power under section 254(2) is confined to rectification of a mistake apparent from the record. The Tribunal had already considered the relevant material and the contention that it had made out a new case was rejected on merits. No manifest or obvious error was shown which could justify rectification. The precedent on rectification did not assist the applicants because the factual foundation for correction was absent.

Conclusion: The Tribunal rightly rejected the rectification applications under section 254(2).

Final Conclusion: The tax appeals failed, and the Tribunal's view on capital gains liability as well as on the rejection of rectification was upheld.

Ratio Decidendi: For the purposes of capital gains, an agreement may amount to a transfer under section 2(47)(vi) when it effectively conveys or enables enjoyment of immovable property, even if physical possession is not simultaneously delivered; rectification under section 254(2) lies only for an obvious mistake apparent from the record.

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