Unregistered agreement to sell cannot by itself trigger capital gains where no effective transfer of immovable property is shown.

Capital gains could not be charged on the basis of an unregistered agreement to sell and alleged delivery of possession, because transfer of immovable property required a registered conveyance in law. The claimed handing over of possession was not established with certainty on the agreement date, and even if possession had been delivered, it could not by itself substitute for an effective transfer for capital gains purposes. Clause (v) of section 2(47) of the Income-tax Act, 1961, introduced from 1 April 1988, was inapplicable to the assessment year concerned. No taxable transfer was therefore made out in the relevant year.

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Issues: Whether capital gains could be charged on the basis of the agreement to sell and alleged handing over of possession dated 14 September 1974, and whether clause (v) of section 2(47) of the Income-tax Act, 1961 applied to the assessment year in question.

Analysis: The transfer of immovable property was held to require a registered conveyance, and an unregistered agreement to sell could not by itself operate as a transfer in law. The alleged handing over of possession was not shown with certainty to have taken place on the date of the agreement, and even if possession had been delivered, it could not substitute for a legally effective conveyance. Clause (v) of section 2(47) of the Income-tax Act, 1961, introduced with effect from 1 April 1988, was held inapplicable to the assessment year under consideration. The reasoning also reflected the principle that delivery of possession in part performance does not, by itself, complete a transfer of immovable property for capital gains purposes.

Conclusion: No taxable transfer was made out in the relevant assessment year, and the capital gain was not chargeable.

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