Capital gains on agreement to sell depend on actual transfer effect, not mere recitals, where title remains disputed.

For capital gains purposes, an agreement to sell results in transfer only when, on the facts, it effectively enables transfer or enjoyment of immovable property within section 2(47). The absence of registration does not by itself rule out transfer under clause (vi), but the agreement is not conclusive where title, possession, or execution remains contingent on unresolved disputes. Here, the disputed balance land required factual verification because the parties' actual conduct, ownership position, and the purchaser's confirmation had to be examined. The matter was therefore remanded to the Assessing Officer for fresh determination of the extent, if any, to which capital gains had accrued.

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Issues: (i) Whether the agreement to sell dated 04.12.2006 constituted a transfer of the capital asset within the meaning of section 2(47) of the Income-tax Act, 1961 so as to give rise to capital gains; (ii) Whether the alleged dispute over title and the terms of the agreement prevented accrual of capital gains on the balance land and required factual verification by the Assessing Officer.

Issue (i): Whether the agreement to sell dated 04.12.2006 constituted a transfer of the capital asset within the meaning of section 2(47) of the Income-tax Act, 1961 so as to give rise to capital gains.

Analysis: The agreement to sell was examined in the light of the statutory definition of transfer, including clauses dealing with part performance and transactions having the effect of transferring or enabling enjoyment of immovable property. The decision also noted that the absence of registration may affect clause (v), but that does not by itself exclude clause (vi). The decisive question was whether the agreement, on its facts and in substance, enabled transfer of the property to the purchaser in its capacity as buyer.

Conclusion: The agreement was capable of constituting a transfer under section 2(47) only to the extent the contractual conditions for transfer were in fact fulfilled.

Issue (ii): Whether the alleged dispute over title and the terms of the agreement prevented accrual of capital gains on the balance land and required factual verification by the Assessing Officer.

Analysis: The agreement was not treated as automatically conclusive of transfer because the surrounding circumstances, including the subsisting dispute over ownership and the actual conduct of the parties, had to be examined. It was observed that if the sale deed could not lawfully be executed until the dispute was resolved, transfer could not be said to have arisen merely from recitals in the agreement. The record indicated that only part of the land was capable of being treated as transferred on the stated date, and the remaining portion required verification of the factual position, including the extent of ownership, possession, and the purchaser's confirmation.

Conclusion: The matter was restored to the Assessing Officer for factual determination and verification, and capital gains on the disputed balance land were not finally upheld at this stage.

Final Conclusion: The assessment on the disputed portion of the capital gain was set aside for fresh examination, with the appeal succeeding only to the extent of remand and not by a final determination on the entire tax liability.

Ratio Decidendi: For capital gains purposes, an agreement to sell results in transfer only when, on the facts, it effectively enables transfer or enjoyment of the immovable property; where title or execution remains genuinely contingent on unresolved disputes, recitals in the agreement are not conclusive and factual verification is necessary.

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