Transfer by part performance and agricultural land status defeated the short-term capital gain addition.

Section 2(47)(v) read with section 53A can treat a transaction as a transfer when possession is delivered in part performance of a contract, but the Tribunal found that the assessee had acted only as a name lender, received no consideration, and that the group concerns bore the acquisition and development costs. On those facts, the effective transfer had occurred when the lands were agricultural lands and therefore outside the definition of capital asset under section 2(14)(iii). The later execution of sale deeds in the year under appeal did not alter that earlier character, so the short-term capital gain addition was not sustainable.

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Issues: Whether the addition on account of short-term capital gain arising from the transfer of two parcels of land was sustainable in the year under consideration, and whether the earlier agreement to sell and handing over of possession resulted in a transfer for tax purposes in an earlier assessment year.

Analysis: The assessee had purchased agricultural lands and had entered into agreements to sell in an earlier year, with possession stated to have been handed over then. The Tribunal examined the effect of section 2(47)(v) of the Income-tax Act read with section 53A of the Transfer of Property Act, 1882, and noted that a transfer for income-tax purposes can arise on part performance where possession is delivered in pursuance of a contract. On the facts, however, the Tribunal found that the assessee had not received consideration, had acted only as a name lender for the group concerns, and that the entire transaction, including purchase cost, registration charges and development expenses, had been borne by the group companies. It further held that the lands were agricultural lands when the effective transfer occurred, and therefore were not capital assets within section 2(14)(iii) of the Income-tax Act, 1961. The Tribunal also noticed that the later execution of sale deeds in the relevant year did not change the character of the earlier transfer.

Conclusion: The addition of short-term capital gain was not sustainable for the year under appeal, and the assessee succeeded.

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