Agreement to sell immovable property does not trigger capital gains without possession or a registered sale deed.

A mere agreement to sell an immovable property does not by itself amount to a transfer for capital gains purposes where title has not passed, possession has not been delivered, and no registered sale deed has been executed. Although section 2(47) of the Income-tax Act defines "transfer" broadly, the facts did not attract section 53A of the Transfer of Property Act, so the lower authorities' view based on extinguishment of rights was unsustainable. Capital gains could not be assessed in the earlier year on the basis of the agreement to sell, and the later-year computation was upheld.

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Issues: Whether the execution of an agreement to sell 80% undivided share in immovable property amounted to a transfer of the capital asset so as to attract capital gains in the earlier assessment year, or whether transfer occurred only on execution of the registered sale deed.

Analysis: The dispute turned on the scope of the expression "transfer" in relation to a capital asset. An agreement to sell, by itself, does not convey title in immovable property and does not culminate in transfer of ownership unless and until a registered sale deed is executed. The extended meaning of transfer under section 2(47) of the Income-tax Act, 1961 may cover certain rights in the asset, but on the facts here there was only an agreement to sell and possession was not handed over. The facts did not attract the limited protection or effect of section 53A of the Transfer of Property Act. The reasoning adopted by the lower authorities on extinguishment of rights was therefore unsustainable.

Conclusion: The agreement to sell did not result in transfer of the property in the earlier year, and capital gains could not be assessed on that basis. The assessee's computation for the later year was upheld.

Ratio Decidendi: A mere agreement to sell immovable property, without transfer of possession or execution of a registered sale deed, does not amount to transfer of the property for capital gains purposes, though the statutory definition of transfer is wider than the ordinary law of conveyancing.

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