Actual holding, not just registered ownership, can satisfy long-term capital asset treatment under the Income-tax Act.

The expression "held" in section 2(42A) was read as actual holding of the asset, not confined to registered ownership, so evidence of prior possession and substantial payment supported a holding period exceeding 60 months. On that basis, the plot qualified as a long-term capital asset and the assessee was entitled to deduction under section 80T. The alternative contention that transfer had already become effective in March 1961 on possession and payment alone was rejected, because the material did not establish passing of title in law without a registered conveyance. The note thus states that factual holding can satisfy the long-term asset test, while title transfer still requires proper legal conveyance.

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Issues: (i) Whether the plot of land was held by the assessee for more than 60 months so as to qualify as a long-term capital asset under section 2(42A) of the Income-tax Act, 1961 and attract deduction under section 80T of that Act. (ii) Whether the transfer of the plot had already become effective in March 1961 on the basis of possession and substantial payment of consideration, notwithstanding the later registered sale deed.

Issue (i): Whether the plot of land was held by the assessee for more than 60 months so as to qualify as a long-term capital asset under section 2(42A) of the Income-tax Act, 1961 and attract deduction under section 80T of that Act.

Analysis: The expression "held" in section 2(42A) was read as denoting actual holding and not necessarily holding as a registered owner. The evidence of payment of property tax in 1968, together with the payment of substantial consideration to the vendor earlier, supported the assessee's possession and holding of the asset long before the sale. On that basis, the holding period exceeded 60 months.

Conclusion: The issue was decided in favour of the assessee. The asset was a long-term capital asset and the assessee was entitled to deduction under section 80T.

Issue (ii): Whether the transfer of the plot had already become effective in March 1961 on the basis of possession and substantial payment of consideration, notwithstanding the later registered sale deed.

Analysis: Although the assessee had obtained possession before 1968 and had paid most of the consideration, there was no sufficient material to show that title had already passed in law in March 1961 without the registered conveyance. The plea based on the extension of section 54 of the Transfer of Property Act, 1882 to Delhi was therefore not accepted.

Conclusion: The issue was decided against the assessee.

Final Conclusion: The appeal succeeded because the assessee established long-term holding of the capital asset and consequent entitlement to special deduction, notwithstanding rejection of the alternative case on earlier transfer.

Ratio Decidendi: For section 2(42A) of the Income-tax Act, 1961, "held" refers to actual holding of the asset and is not confined to registered ownership; evidence of possession and prior payment may establish the requisite holding period for long-term capital gains treatment.

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