Capital gains transfer can arise from an enforceable agreement to sell with possession, even before the registered deed.

A right to obtain conveyance under an agreement to sell is a capital asset, so its extinguishment or relinquishment can attract capital gains. For tax purposes, section 2(47) is wider than general transfer law and may treat possession under a written agreement, including arrangements falling within section 53A of the Transfer of Property Act, as a transfer even before a registered sale deed is executed. Unregistered agreements do not become sham merely for want of registration and remain relevant for specific performance and collateral purposes. On these principles, the 4.4.2008 rights were capital rights, the 2.3.2009 agreement with possession constituted a transfer, and the later registered deed did not displace that position; the capital gains addition was deleted.

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Issues: (i) Whether the rights acquired by the purchaser under the agreement dated 4.4.2008 were capital rights within the meaning of the Income-tax Act. (ii) Whether the agreement dated 2.3.2009 together with delivery of possession amounted to a transfer giving rise to capital gains under the Income-tax Act read with section 53A of the Transfer of Property Act, 1882. (iii) Whether the surrounding circumstances justified ignoring the agreements and treating the transfer as arising only on the registered sale deed dated 27.1.2010.

Analysis: The right to obtain a conveyance under an agreement to sell is a capital asset. Such a right is enforceable by a suit for specific performance and its extinguishment or relinquishment can attract capital gains. The definition of transfer under section 2(47) is wider than general law and includes transactions falling within section 53A of the Transfer of Property Act, 1882 as well as arrangements that enable enjoyment of immovable property. Where possession is handed over in pursuance of a written agreement, the transfer may be complete for income-tax purposes even if legal title passes later by registered deed. An unregistered agreement does not cease to be relevant for collateral purposes, including specific performance, and the fact that the agreements were unregistered did not make them sham or bogus. The surrounding circumstances, including the change in land character and the commercial structure of the transactions, did not justify disregarding the agreements.

Conclusion: The rights under the 4.4.2008 agreement were capital rights, the 2.3.2009 agreement with possession constituted a transfer for capital gains purposes, and the agreements could not be ignored merely because the later registered sale deed was executed in 2010. All three issues were decided in favour of the assessee.

Final Conclusion: The addition made towards short-term capital gain was unsustainable and was deleted, resulting in full relief to the assessee.

Ratio Decidendi: For capital gains purposes, a written and enforceable agreement to sell that conveys a right to obtain conveyance, and especially one coupled with possession in part performance, can constitute a transfer even before execution of the registered sale deed; unregistered status alone does not render such transactions non-genuine or ineffective for taxation.

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