Capital gains on assignment of conveyance rights upheld despite incomplete formal transfer of agricultural land

Receipt of full consideration under an agreement and assignment of the right to obtain conveyance of immovable property was treated as a transfer of a capital asset, even though formal conveyance of the underlying land was incomplete. The right transferred, not the agricultural land itself, was held to constitute the capital asset for capital gains purposes. Reliance on the Bombay Tenancy and Agricultural Lands Act, 1948 did not alter the taxable character of the transaction. The addition on account of capital gains was sustained.

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Issues: Whether the receipt of consideration against the agreement amounted to transfer of a capital asset so as to attract capital gains, where the assessee claimed that only agricultural land held under the Bombay Tenancy and Agricultural Lands Act, 1948 was involved and that no valid transfer had taken place during the year.

Analysis: The consideration under the agreement had been fully received, and the assessee had undertaken to transfer the land or nominate any person for transfer, while also conferring rights regarding compensation and compliance with procedural requirements. On these facts, the transferred asset was not treated as the agricultural land itself but as the right to obtain conveyance of immovable property. Such right constitutes a capital asset, and the receipt of the full consideration supported the conclusion that the transaction had resulted in a taxable transfer. The provisions of the Bombay Tenancy and Agricultural Lands Act, 1948 relied upon by the assessee did not displace the capital gains character of the transaction in the manner claimed.

Conclusion: The transfer was taxable as capital gains on the assignment of the right to obtain conveyance of the agricultural land, and the addition was ly sustained.

Ratio Decidendi: Where an assessee receives full consideration under an agreement and transfers the right to obtain conveyance of immovable property, the transaction amounts to transfer of a capital asset for capital gains purposes even if formal conveyance of the underlying land remains incomplete.

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