Agricultural land transfer rights under an MOU may trigger transfer status, but capital gains tax can still fail.

Possession delivered under an MOU can amount to a transfer under section 2(47)(v) of the Income-tax Act when the arrangement is of the kind protected by section 53-A of the Transfer of Property Act, so receipts linked to transfer-related rights may be treated as consideration for transfer. Even so, where the underlying asset is agricultural land and that character remains undisputed in substance, the resulting income is not taxable as capital gains. The discussion also notes that revision under section 263 is not sustainable where the core finding that the land was agricultural cannot be displaced on the facts found.

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Issues: (i) Whether the transaction in respect of the agricultural land amounted to a transfer giving rise to taxable capital gains under section 2(47)(v) of the Income-tax Act, 1961. (ii) Whether the Commissioner was justified in invoking section 263 of the Income-tax Act, 1961 to revise the assessment order.

Issue (i): Whether the transaction in respect of the agricultural land amounted to a transfer giving rise to taxable capital gains under section 2(47)(v) of the Income-tax Act, 1961.

Analysis: The rights in the immovable property were acquired through an MOU and possession was delivered in relation to the property. Such possession, when coupled with a contract of the nature referred to in section 53-A of the Transfer of Property Act, 1882, answers the statutory definition of transfer under section 2(47)(v) of the Income-tax Act, 1961. The receipts therefore represented consideration relatable to transfer of rights in the property. However, the property was found to be agricultural land, and that character was not disputed in substance.

Conclusion: The transaction fell within the scope of transfer under section 2(47)(v), but the agricultural nature of the land prevented the income from being taxed as capital gains.

Issue (ii): Whether the Commissioner was justified in invoking section 263 of the Income-tax Act, 1961 to revise the assessment order.

Analysis: The assessment order under section 143(3) accepted the assessee's claim, and the Commissioner revised it on the footing that the nature of the MOU transaction had been ignored. The appellate court accepted that the assessment lacked detailed discussion on the rights created by the MOU, but held that the Commissioner could not, on the facts found, displace the core conclusion that the land was agricultural and could not trace the income to a different taxable event. The attempted revision therefore did not survive on merits.

Conclusion: The invocation of section 263 was not sustained.

Final Conclusion: The appeal failed because the disputed receipts were ultimately referable to transfer of agricultural land, and the revenue could not establish a taxable capital gains liability.

Ratio Decidendi: Where the subject matter of the transaction is agricultural land and the revenue does not disturb that character, the receipt arising from transfer-related rights cannot be taxed as capital gains merely because possession and contractual rights attracted the definition of transfer.

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