Possession under sale agreement may trigger capital gains transfer where part performance and delivery of possession are established.

Possession handed over under a written agreement for sale can amount to a transfer for capital gains purposes where the arrangement falls within section 53A of the Transfer of Property Act and section 2(47)(v) of the Income-tax Act. The later rescission of the contract does not remove the tax incidence for the year in which the transfer occurred. A subsequent registration requirement under section 17(1A) of the Registration Act does not alter that result where the agreement predated the amendment, as the provision was treated as non-retrospective. The capital gains charge therefore arises on the basis of part performance and delivery of possession, subject to computation under section 48.

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Issues: Whether handing over of possession under an unregistered agreement for sale constituted a transfer within section 2(47)(v) of the Income-tax Act, 1961 so as to attract capital gains tax, and whether subsequent rescission of the contract or the absence of registration under section 17(1A) of the Registration Act, 1908 displaced that tax liability.

Analysis: The agreement for sale and the parties' admissions established that possession of the property had been handed over to the proposed purchaser during the relevant assessment year, and the purchaser had also acted upon the arrangement by undertaking acts consistent with possession. Once possession is allowed to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882, the transaction falls within the inclusive definition of transfer in section 2(47)(v) of the Income-tax Act, 1961. The later rescission of the contract did not erase the tax consequence for the year in which the transfer occurred. The requirement of registration introduced by section 17(1A) of the Registration Act, 1908 did not assist the assessee because the agreement predated that amendment and the provision was held not to operate retrospectively.

Conclusion: The transfer was exigible to capital gains tax under section 2(47)(v) and the assessee's challenge to the taxability failed.

Final Conclusion: The substantive taxability issue was decided in favour of the Revenue, but the matter was sent back only for computation of capital gains under section 48 of the Income-tax Act, 1961.

Ratio Decidendi: Where possession is handed over in part performance of a written agreement for transfer of immovable property, the transaction constitutes a transfer for capital gains purposes under section 2(47)(v), and a subsequent rescission or a later statutory registration requirement does not negate the tax incidence for the relevant assessment year.

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