Capital gains transfer in part performance was complete on possession and rights passing, despite later registration.

Capital gains on the sale of immovable property were taxable in assessment year 2006-07 because the transaction satisfied section 2(47)(v) of the Income-tax Act read with section 53A of the Transfer of Property Act. The registered deed and surrounding conduct showed that the vendors had received consideration, handed over title documents, and put the purchaser in possession in September 2005; later registration did not postpone transfer. On those facts, the earlier year was the year of assessability and the challenge failed.

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Issues: Whether the capital gains arising from the sale of the immovable property were assessable in assessment year 2006-07 or assessment year 2007-08 under section 2(47)(v) of the Income-tax Act, 1961 read with section 53A of the Transfer of Property Act, 1882.

Analysis: The sale deed, though registered later, recorded that the vendors had transferred all rights in the property, received the consideration, handed over the title documents, and placed the purchaser in possession in September 2005. The surrounding material such as telephone bills, ration card and later correspondence was found insufficient to displace the recitals and effect of the transaction. On these facts, the transaction satisfied the elements of transfer by way of part performance and the rights in the property stood relinquished in the earlier year.

Conclusion: The capital gains were rightly held taxable in assessment year 2006-07 and the assessee's challenge on the year of assessability failed.

Final Conclusion: The appeals were dismissed and the assessment of capital gains in the earlier assessment year was sustained.

Ratio Decidendi: For capital gains purposes, where an unregistered agreement and attendant conduct show transfer of possession and substantive rights in part performance, the transfer is complete for section 2(47)(v) of the Income-tax Act, 1961 even if formal registration occurs later.

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