Section 2(47)(v) transfer requires possession in part performance; prior possession cannot trigger capital gains tax retrospectively.

Section 2(47)(v) applies only where possession of immovable property is taken or retained in part performance of a contract within the scope of section 53A of the Transfer of Property Act. On the agreement considered, possession had already been taken on 18-2-1986, before clause (v) came into force on 1-4-1988, and there was no material showing continued or retained possession in part performance during assessment year 1988-89. The statutory fiction could not be extended to fasten a transfer in a year preceding its commencement. The transaction was therefore not a transfer under section 2(47)(v) for that year, and capital gains could not be brought to tax on that basis.

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Issues: Whether capital gains could be brought to tax for assessment year 1988-89 on the footing that the transaction amounted to a transfer under section 2(47)(v) of the Income-tax Act, 1961 because possession was allegedly retained by the transferee during that year.

Analysis: Section 2(47)(v) was inserted with effect from 1-4-1988 to include within the definition of transfer transactions involving allowing of possession of immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882. The operative requirement is that possession must be taken or retained in part performance of the contract and with reference to the terms of that contract. On the agreement placed before the Tribunal, the promoter had taken possession on 18-2-1986, when clause (v) was not in force. The agreement did not show any case of earlier possession being continued or retained in part performance during the relevant assessment year. The statutory fiction could not be expanded beyond its intended scope to fasten transfer in a year prior to its commencement.

Conclusion: The transaction did not constitute a transfer under section 2(47)(v) in assessment year 1988-89, and the revisionary order directing assessment of capital gains could not be sustained.

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