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Issues: (i) Whether handing over possession of immovable property pursuant to a government order, without a written contract of the kind contemplated by section 53A of the Transfer of Property Act, 1882 and without determination of consideration, constituted a transfer under section 2(47)(v) of the Income-tax Act, 1961 so as to attract long-term capital gains; (ii) Whether the assessee's claim for deduction of Voluntary Retirement Scheme expenditure under section 35DDA of the Income-tax Act, 1961 could be finally decided by the first appellate authority by directing verification by the Assessing Officer.
Issue (i): Whether handing over possession of immovable property pursuant to a government order, without a written contract of the kind contemplated by section 53A of the Transfer of Property Act, 1882 and without determination of consideration, constituted a transfer under section 2(47)(v) of the Income-tax Act, 1961 so as to attract long-term capital gains.
Analysis: The deeming provision in section 2(47)(v) operates only where possession is allowed in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882. A written contract from which the terms of transfer can be ascertained with reasonable certainty is essential. On the facts, possession was handed over in compliance with a unilateral government order and no such contract existed. Consideration for the transfer was also not quantified, because the cost of land was to be fixed later by separate government order. Mere accounting entries crediting market value and removing the asset from fixed assets did not establish accrual of real income or full value of consideration.
Conclusion: No transfer within section 2(47)(v) was established in the relevant year, and the addition on account of long-term capital gains was rightly deleted.
Issue (ii): Whether the assessee's claim for deduction of Voluntary Retirement Scheme expenditure under section 35DDA of the Income-tax Act, 1961 could be finally decided by the first appellate authority by directing verification by the Assessing Officer.
Analysis: The first appellate authority cannot set aside the assessment by leaving the substantive issue to be verified and decided afresh by the Assessing Officer. If factual verification was necessary, the proper course was to call for a remand report and then decide the claim on merits. The direction issued did not amount to a conclusive adjudication of the deduction claim.
Conclusion: The direction on the VRS deduction issue was set aside and the matter was remitted to the first appellate authority for fresh decision on merits.
Final Conclusion: The Revenue's appeal failed on the capital gains issue, while the assessee's cross-objection and connected appeals succeeded only to the extent of remand and fresh consideration of the VRS-related claim.
Ratio Decidendi: Section 2(47)(v) applies only where possession of immovable property is handed over in part performance of a written contract satisfying section 53A of the Transfer of Property Act, 1882, and bookkeeping entries alone cannot create taxable capital gains in the absence of determinable consideration.
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