Enforceable transfer for capital gains arises only when the transaction matures under property law and tax law.

Transfer of land for capital gains purposes was recognised only when the arrangement matured into an enforceable transaction satisfying section 53A of the Transfer of Property Act and section 2(47)(v) of the Income-tax Act. Because the original sale arrangement was not fully implemented and a later compromise deed revived the transaction with payment of the balance consideration, the transfer was treated as having occurred in assessment year 2004-05, not 1999-2000. Recorded land development expenses were also allowable with indexation, but only to the extent supported by the books and subject to verification in accordance with law.

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Issues: (i) Whether the transfer of the land took place in assessment year 1999-2000 on the execution of the sale agreement and power of attorney, or in assessment year 2004-05 on the compromise deed and payment of the balance consideration; (ii) whether the land development expenses recorded in the books were allowable with indexation in computing capital gains.

Issue (i): Whether the transfer of the land took place in assessment year 1999-2000 on the execution of the sale agreement and power of attorney, or in assessment year 2004-05 on the compromise deed and payment of the balance consideration.

Analysis: The definition of transfer under section 2(47) of the Income-tax Act, 1961 is inclusive, and clause (v) brings within its scope transactions of the nature covered by section 53A of the Transfer of Property Act, 1882. The sale agreement contained a cancellation clause upon non-compliance, and the subsequent filing of criminal proceedings showed that the contractual terms had not been fulfilled. The later compromise deed ratified the earlier power of attorney and reactivated the arrangement, while the balance consideration was scheduled and ultimately paid under the compromise, indicating effective transfer only at that later stage.

Conclusion: The transfer was rightly brought to tax in assessment year 2004-05, and the assessee's contention that it arose in assessment year 1999-2000 was rejected.

Issue (ii): Whether the land development expenses recorded in the books were allowable with indexation in computing capital gains.

Analysis: The appellate authority directed allowance only of the land development expenses actually debited in the books, leaving verification to the Assessing Officer and not granting any quantified relief beyond what was supported by the records. The direction was confined to expenses evidenced in the accounts and their permissible indexation in accordance with law.

Conclusion: The allowance of recorded land development expenses with indexation was upheld.

Final Conclusion: The taxability of the capital gain in assessment year 2004-05 was sustained, and the claim for recorded land development expenses was also accepted in principle, resulting in dismissal of both appeals.

Ratio Decidendi: For purposes of capital gains, a transfer may be recognized only when the arrangement has matured into an enforceable transaction satisfying section 53A of the Transfer of Property Act, 1882 and section 2(47)(v) of the Income-tax Act, 1961; recorded cost-related expenses are allowable in capital gains computation if supported by the books and verified in accordance with law.

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