Part-performance transfer and section 54B limits barred relief for an HUF on agricultural land sale

ITAT Delhi held that transfer of agricultural land occurred under section 2(47)(v) when possession was given in part performance of unregistered agreements and substantial consideration had been received; a later, unsubstantiated claim of repossession did not defeat capital gains liability. The tribunal also held that section 54B, as it stood for assessment year 2012-13 before the 1 April 2013 amendment, applied only to an individual or the parent of such individual and not to a Hindu undivided family. Capital gains were therefore taxed and the deduction claim was denied.

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Issues: (i) Whether capital gains were chargeable on transfer of agricultural land where the property was sold under unregistered agreements, substantial consideration was received, possession was handed over, and a later claim of repossession was raised; (ii) Whether deduction under section 54B was available to a Hindu undivided family for assessment year 2012-13.

Issue (i): Whether capital gains were chargeable on transfer of agricultural land where the property was sold under unregistered agreements, substantial consideration was received, possession was handed over, and a later claim of repossession was raised.

Analysis: The transaction satisfied the ingredients of transfer under section 2(47)(v) of the Income-tax Act, 1961, because possession was allowed to be taken in part performance of the agreement and substantial consideration had already been received. The later plea of temporary repossession was not supported by reliable evidence and did not negate the completed transfer for capital gains purposes.

Conclusion: Capital gains were rightly charged to tax, and the assessee's challenge on this issue failed.

Issue (ii): Whether deduction under section 54B was available to a Hindu undivided family for assessment year 2012-13.

Analysis: As the relevant assessment year preceded the amendment effective from 1 April 2013, the unamended provision applied. On its plain language, section 54B at the relevant time extended relief only to an individual assessee or the parent of such assessee, and not to a Hindu undivided family. The contrary view relied upon by the assessee was not followed.

Conclusion: Deduction under section 54B was not available to the assessee being a Hindu undivided family for assessment year 2012-13.

Final Conclusion: The assessee failed on the substantive grounds, and the additions and denial of deduction were sustained.

Ratio Decidendi: Where possession of immovable property is handed over in part performance of an agreement and substantial consideration is received, transfer arises under section 2(47)(v); and section 54B, as applicable before its amendment from 1 April 2013, did not extend to a Hindu undivided family.

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