Unregistered property development agreement cannot trigger capital gains tax under section 2(47)(v) without a legally effective transfer.

Unregistered property development and supplementary agreements for transfer of immovable property did not create a taxable transfer under section 2(47)(v) of the Income-tax Act, because an unregistered contract cannot be legally effective for invoking section 53A of the Transfer of Property Act read with sections 17 and 49 of the Registration Act. Although part consideration was received earlier and possession was given later, the capital gains were taxable only when the transfer became legally effective. The addition for taxing the gains in the impugned year was therefore unsustainable.

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Issues: Whether capital gains arising from an unregistered property development agreement and supplementary agreement could be taxed in the assessment year in which part consideration was received, on the basis of transfer under section 2(47)(v) of the Income-tax Act, 1961.

Analysis: The assessee had entered into a property development agreement and a supplementary agreement for transfer of rights in immovable property, but neither document was registered. The Tribunal noted that part consideration had been received in one financial year and the balance in the next, while possession was given only later and the assessee offered the gain to tax after receipt of the full consideration. Relying on the principle laid down in relation to section 53A of the Transfer of Property Act, 1882 and sections 17 and 49 of the Registration Act, 1908, the Tribunal held that an unregistered contract for transfer of immovable property does not have effect in law for invoking section 2(47)(v).

Conclusion: The unregistered agreements did not constitute a transfer under section 2(47)(v), and the capital gains could not be brought to tax in the impugned assessment year.

Final Conclusion: The addition based on taxation of capital gains in the impugned year was unsustainable and the assessee succeeded in the appeal.

Ratio Decidendi: For purposes of section 2(47)(v), an agreement for transfer of immovable property must be legally effective in law, and an unregistered document cannot found a taxable transfer on the basis of part performance.

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