Registered sale deed alone may not trigger capital gains if consideration is unpaid and possession is retained.

A registered sale deed does not, by itself, establish a taxable transfer for capital gains if the parties intended the sale to take effect only on full payment and possession was not delivered; on the stated facts, dishonoured cheques, stop-payment instructions, and continuing possession with the transferor meant the transfer was not complete. For another sale deed, proportionate cost of development items such as roads, wells, baories and boundary wall, together with accepted development expenditure, was treated as part of the capital gains computation. Expenditure linked to partnership firm remuneration and interest was allowed on a consistent factual basis, while the claim against interest income under section 57 required fresh factual examination of whether the expenses were wholly and exclusively incurred for earning that income.

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Issues: (i) Whether the two registered sale deeds executed in favour of one purchaser resulted in a taxable transfer giving rise to long-term capital gains when the full sale consideration was not discharged and possession was not handed over; (ii) whether the proportionate expenditure on development and structures such as wells, baories and roads was allowable while computing capital gains on the third sale deed; (iii) whether expenditure claimed against partnership firm remuneration and interest was allowable; and (iv) whether expenditure claimed against interest income under section 57 was allowable.

Issue (i): Whether the two registered sale deeds executed in favour of one purchaser resulted in a taxable transfer giving rise to long-term capital gains when the full sale consideration was not discharged and possession was not handed over.

Analysis: A registered deed has evidentiary value, but it is not conclusive where cogent evidence shows that the transaction did not culminate in an effective transfer. The relevant inquiry was whether the parties intended the transfer to take effect only upon payment of the full consideration and whether possession was actually delivered. On the facts, the cheques towards consideration were dishonoured, the purchaser had instructed stop payment, possession remained with the transferor, and contemporaneous litigation supported the case that the bargain had not been completed. In such circumstances, the transfer did not satisfy the requirements of a completed transfer or part performance, and the income was only hypothetical, not real.

Conclusion: The issue was decided in favour of the assessee. No capital gains were chargeable on the two disputed sale deeds.

Issue (ii): Whether the proportionate expenditure on development and structures such as wells, baories and roads was allowable while computing capital gains on the third sale deed.

Analysis: The factual record showed the existence of roads, wells, baories and boundary wall on the transferred land, and the property was sold along with those structures. Since title and possession over those appurtenant features passed with the land, their value formed part of the cost base for computation purposes. The claimed development expenditure was also supported to the extent accepted by the appellate authority, and no contrary material displaced those findings.

Conclusion: The issue was decided in favour of the assessee. The proportionate cost and related development expenditure were allowable.

Issue (iii): Whether expenditure claimed against partnership firm remuneration and interest was allowable.

Analysis: The claim had already been accepted in earlier years on similar facts, and the same principle was followed consistently. The expenditure was incurred in relation to earning business income from partnership firms and no distinguishing feature was shown for the year under appeal.

Conclusion: The issue was decided in favour of the assessee. The expenditure was allowable.

Issue (iv): Whether expenditure claimed against interest income under section 57 was allowable.

Analysis: The claim required a factual examination of whether the office and staff expenses were laid out wholly and exclusively for earning interest income. The lower authorities had not examined all relevant considerations, including the nature of the funds, the pattern of deposits, and the need for administrative support. The matter therefore required fresh adjudication.

Conclusion: The issue was remanded for reconsideration. The relief granted by the appellate authority was not finally affirmed or reversed on merits.

Final Conclusion: The dispute over capital gains was substantially resolved in favour of the assessee, while one expenditure issue was restored for fresh examination. The remaining revenue and assessee grounds were disposed of in accordance with the above findings.

Ratio Decidendi: A registered sale deed does not by itself create a taxable transfer for capital gains purposes if the parties intended the sale to become effective only on payment of the full consideration and the transferee neither paid the consideration nor obtained possession.

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