Transfer on part performance, cessation of liabilities, nil block depreciation and unsupported commission claim were all upheld in tax treatment.

An agreement to sell coupled with delivery of actual possession and part performance attracted section 53A of the Transfer of Property Act and section 2(47)(v) of the Income-tax Act, so the property transfer was taxable in the relevant year notwithstanding later execution of the sale deed. The addition under section 41(1) was sustained because the sundry creditor balances were treated as ceased liabilities on the material before the Tribunal. Depreciation on the plant and machinery block was disallowed once the block's written down value had become nil. Commission claimed as transfer cost was also disallowed because no evidence showed actual incurrence or payment during the relevant year.

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Issues: (i) Whether the agreement to sell and handing over of possession amounted to a transfer giving rise to long-term capital gains in the relevant assessment year; (ii) whether the addition under section 41(1) for cessation of sundry creditors was sustainable; (iii) whether depreciation on the plant and machinery block was disallowable after the block's written down value became nil; and (iv) whether commission expenditure claimed as transfer cost was allowable.

Issue (i): Whether the agreement to sell and handing over of possession amounted to a transfer giving rise to long-term capital gains in the relevant assessment year.

Analysis: The agreement recorded delivery of actual and physical possession of the property to the purchaser, permitted entry for demolition and related works, and enabled specific performance for breach. The transferee had taken possession and acted in furtherance of the contract, satisfying the requirements of section 53A of the Transfer of Property Act, 1882 and consequently section 2(47)(v) of the Income-tax Act, 1961. The later execution of the sale deed did not defer the tax consequence where the transfer conditions were already met in the relevant year.

Conclusion: The transfer was taxable in the relevant assessment year and the finding was against the assessee.

Issue (ii): Whether the addition under section 41(1) for cessation of sundry creditors was sustainable.

Analysis: The liability had been accepted as ceased during the assessment proceedings, and no serious rebuttal was produced before the Tribunal. On the material available, the creditor balances written off represented a cessation of liability within the meaning of section 41(1) of the Income-tax Act, 1961.

Conclusion: The addition under section 41(1) was sustained and the finding was against the assessee.

Issue (iii): Whether depreciation on the plant and machinery block was disallowable after the block's written down value became nil.

Analysis: The short-term capital loss had been computed and allowed under section 50 of the Income-tax Act, 1961, with the consequence that the written down value of the relevant block became nil. Depreciation cannot be allowed on a block of assets with nil written down value.

Conclusion: The disallowance of depreciation was upheld and the finding was against the assessee.

Issue (iv): Whether commission expenditure claimed as transfer cost was allowable.

Analysis: No evidence was produced to show actual incurrence or payment of the commission during the relevant previous year. In the absence of proof, the claim was not allowable as a deduction.

Conclusion: The disallowance of commission expenditure was upheld and the finding was against the assessee.

Final Conclusion: All substantive additions and disallowances were sustained, leaving no relief to the assessee in the appeal.

Ratio Decidendi: Where possession is handed over under a written agreement to sell and the transferee is put in control in part performance, the transaction constitutes a transfer under section 2(47)(v) of the Income-tax Act, 1961 read with section 53A of the Transfer of Property Act, 1882 in the year those conditions are fulfilled.

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