Allotment right versus property transfer: no short-term capital gain arises where conveyance never passed to the assessee.

Where title and conveyance in immovable property had not passed to the assessee, transfer of the allotment right was not treated as transfer of the plot for short-term capital gains purposes. The assessee had applied for allotment, paid the initial deposit, and the allotment letter contemplated a future conveyance deed after full payment. As the conveyance deed was never executed in the assessee's favour and was instead executed directly in favour of the purchaser, only the right to acquire the plot was transferred. On those facts, no short-term capital gain arose.

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Issues: Whether the assessee made a short-term capital gain on the transfer of the plot, or whether what was transferred was only the right to acquire the plot.

Analysis: The assessee had applied for allotment and paid the initial deposit in 1971. Under Rule 5 of the Punjab Urban Estates (Sales of Sites) Rules, 1965, allotment of a site leads to execution of a conveyance deed in the prescribed manner, and the allotment letter itself contemplated execution of a deed of conveyance after payment of the full purchase price. On the uncontroverted facts, the conveyance deed for the plot was never executed in favour of the assessee and was directly executed in favour of the purchaser. The assessee, therefore, did not transfer an already vested plot but only his right to obtain the plot.

Conclusion: No short-term capital gain arose on the facts, because the subject of transfer was the right to acquire the plot and not the plot itself.

Ratio Decidendi: Where title and conveyance in immovable property have not passed to the assessee, transfer of the allotment right is not equivalent to transfer of the property for purposes of short-term capital gain.

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