Capital gains valuation follows the agreement-to-sell date where property rights are effectively transferred and section 50C applies.

For capital gains purposes, transfer of an immovable property can be linked to the date on which rights are effectively extinguished under an agreement to sell, and that date may govern the stamp valuation under section 50C. After the 2001 amendment to the Registration Act, an agreement executed on or after the amendment must be registered to attract protection under section 53A of the Transfer of Property Act; an unregistered agreement cannot be relied on to protect possession under that provision, though it may still support a specific performance claim. Where the transfer effect arose on the agreement date, valuation was required to be recomputed with reference to that date.

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Issues: Whether the transfer of immovable property was completed on the date of the agreement to sell for the purposes of capital gains taxation, and whether the valuation for section 50C should be taken as on that date.

Analysis: The transfer of a capital asset includes a transaction allowing possession in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882. After the amendments to the Registration Act, 1908, an agreement for transfer of immovable property executed on or after the commencement of the Amendment Act, 2001 must be registered to attract the protection of section 53A. An unregistered agreement cannot be enforced to protect possession under section 53A, though it may still be used in a suit for specific performance. In the present case, the date on which the assessee extinguished rights in the property was held to be the date of the agreement to sell, and that date was relevant for applying the stamp valuation mechanism under section 50C.

Conclusion: The assessee succeeded in part. The property was directed to be valued with reference to the date of the agreement to sell, and the Assessing Officer was required to recompute the capital gains accordingly.

Ratio Decidendi: For purposes of capital gains and section 50C, where rights in immovable property are effectively transferred on the date of an agreement to sell, the relevant valuation date is the date of that agreement, and post-amendment protection under section 53A depends on registration of the contract.

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