Registration and part performance in immovable property transfers did not themselves create taxable capital gains.

For immovable property, the note explains that a legally enforceable transfer depends on registration where the transaction falls within compulsory registration requirements, because an unregistered agreement does not create, assign, limit or extinguish rights in the property. It further states that the doctrine of part performance protects possession as a defence but does not itself confer title, so possession-based arrangements could not, on that view, support a capital gains transfer in the relevant year. The later statutory amendment treating certain possession-based arrangements as transfers is described as significant because it indicates that, before the amendment, such transactions were outside the charging provision.

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Issues: Whether the amounts received under the unregistered agreement of sale and lease arrangement constituted a transfer of a capital asset giving rise to short-term capital gains under section 2(47) read with section 45 of the Income-tax Act, 1961.

Analysis: The decisive question was whether the assessee had acquired and transferred a legally enforceable interest in immovable property during the relevant previous year. The majority held that, for immovable property, title and transferable rights arise only on registration where the transaction falls within the compulsory registration provisions. The agreement of purchase and the long-term lease deed were not registered when executed, and under the Registration Act an unregistered document of this kind does not create, assign, limit or extinguish rights in the property. The majority further held that the doctrine of part performance protects possession as a defence but does not confer title, and therefore could not by itself support a transfer for capital gains purposes for the year in question. The later statutory insertion treating certain possession-based arrangements as transfers was treated as significant because it showed that, before that amendment, such arrangements were not within the charging provision.

Conclusion: The transaction did not amount to a taxable transfer in the assessment year under appeal, and the addition as short-term capital gain was deleted.

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