Transfer under income tax law arose on compromise deed and final payment, not from mere development permission.

Section 53A of the Transfer of Property Act was not attracted because permission to develop the land amounted only to a licence and did not amount to possession in part performance; accordingly, the arrangement did not fall within section 2(47)(v) of the Income-tax Act. By contrast, the later compromise deed, staged payments, and encashment of the cheques extinguished the transferor's rights in the immovable property and produced a de facto transfer. The Supreme Court therefore held that the transaction fell within section 2(47)(ii) and section 2(47)(vi), and capital gains were taxable in the relevant assessment year on completion of the compromise arrangement and receipt of the final consideration.

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Issues: (i) whether the agreement to sell and power of attorney attracted section 53A of the Transfer of Property Act, 1882 so as to bring the transaction within section 2(47)(v) of the Income-tax Act, 1961; (ii) whether the compromise deed and subsequent receipt of consideration constituted a transfer within section 2(47)(ii) and section 2(47)(vi) of the Income-tax Act, 1961.

Issue (i): whether the agreement to sell and power of attorney attracted section 53A of the Transfer of Property Act, 1882 so as to bring the transaction within section 2(47)(v) of the Income-tax Act, 1961

Analysis: Section 53A requires that the transferee must, in part performance, have taken possession of the property or continue in possession and must be willing to perform the contract. The agreement here gave the builder permission to develop and construct on the land, which amounted only to a licence. Such permission did not amount to possession in the legal sense required for section 53A. Therefore, the essential conditions for invoking section 53A were not satisfied.

Conclusion: The transaction did not fall within section 2(47)(v) of the Income-tax Act, 1961.

Issue (ii): whether the compromise deed and subsequent receipt of consideration constituted a transfer within section 2(47)(ii) and section 2(47)(vi) of the Income-tax Act, 1961

Analysis: The compromise deed confirmed the earlier arrangements, reduced part of the consideration, provided for staged payments, and the record showed that the cheques were encashed. On that basis, the assessee's rights in the immovable property stood extinguished when the final payment was received. The transaction therefore had the effect of transferring the property and, in substance, amounted to a de facto transfer bringing it within the tax net.

Conclusion: The compromise deed and receipt of the final consideration fell within section 2(47)(ii) and section 2(47)(vi) of the Income-tax Act, 1961.

Final Conclusion: Capital gains were rightly brought to tax in the relevant assessment year on the footing that the assessee's rights in the property were extinguished upon completion of the compromise arrangement and receipt of the final cheque, and the appeal was therefore not sustainable.

Ratio Decidendi: For section 2(47)(v) to apply, the transferee must obtain possession in part performance within the meaning of section 53A of the Transfer of Property Act, 1882; mere permission to develop the land is not possession, but a later compromise that extinguishes the transferor's rights and enables enjoyment of the immovable property can constitute transfer under section 2(47)(ii) and section 2(47)(vi) of the Income-tax Act, 1961.

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