Capital gains transfer date follows part possession under a registered agreement to sell; later registration does not defer tax liability.

Capital gains are chargeable in the year in which a transfer of a capital asset occurs, and transfer includes an arrangement falling within section 2(47)(v) where possession is allowed in part performance under section 53A of the Transfer of Property Act. A registered agreement to sell, together with handing over of part possession, showed that the transfer had already been completed in the earlier assessment year; section 47 of the Registration Act meant the later sale deed related back to execution. The reassessment based on the later year as the date of transfer was therefore without jurisdiction, and the additions were deleted.

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Issues: Whether the transfer of the immovable property took place in the previous year relevant to the assessment year under appeal so as to attract capital gains tax, and whether the reassessment was valid.

Analysis: Capital gains are chargeable in the previous year in which a transfer of a capital asset takes place. Transfer for this purpose includes a transaction falling within section 2(47)(v) of the Income-tax Act, 1961, where possession of immovable property 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 registered agreement to sell, followed by handing over of part possession and subsequent execution of the registered sale deed, showed that the transfer had already been completed in the earlier assessment year. Section 47 of the Registration Act, 1908 was also applied to hold that a registered document operates from the time of its execution. On that basis, the later assessment year could not be treated as the year of transfer, and the reassessment based on that assumption lacked jurisdiction.

Conclusion: The transfer was held to have taken place in the preceding assessment year, not in the assessment year under appeal, and the reassessment was held to be invalid. The additions were deleted and the appeal was allowed.

Ratio Decidendi: Where a registered agreement to sell satisfies section 2(47)(v) read with section 53A of the Transfer of Property Act, 1882 and possession is parted with, the transfer is complete for capital gains purposes from the date of execution, and a later registration date does not postpone the tax event.

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