Capital gains: transfer of substantive rights in allotted unregistered immovable property qualifies as transfer and taxed as capital gains.

Transfer of substantive rights arising from allotment and a registered agreement to sell in an allotted but unregistered immovable property constitutes a 'transfer' for capital gains purposes under the Income-tax Act; the inclusive definition of transfer and the part performance doctrine support treating such rights as a capital asset. Applying these principles to the facts, the assessee transferred those substantive rights by agreement and, on computation with indexed cost, sustained a long-term capital loss. The operative effect is that the receipt is taxable under the head capital gains and the declared long-term capital loss is allowable.

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Issues: Whether the transfer of the assessee's rights in an allotted but unregistered immovable property (relinquishment/registered agreement to sell of allotment/right) falls within the definition of "transfer" for the purposes of capital gains under the Income-tax Act, 1961 and consequently whether the resultant amount is to be taxed as capital gains (allowing long-term capital loss) or as income from other sources.

Analysis: The facts establish allotment of the unit in 2010, payment by the assessee of substantial amounts towards the unit, substitution/transfer of allotment in the assessee's name, and a registered agreement to sell executed in 2021 for a consideration exceeding the amounts paid. The legal framework includes the broad definition of capital asset and the inclusive definition of transfer which covers transactions that effect transfer or enable enjoyment of immovable property. The part performance doctrine under the Transfer of Property Act, 1882 and departmental guidance on agreements/arrangements that confer rights akin to ownership support treating substantive rights in an allotted property as a capital asset. Applying these legal principles to the facts, the assessee held rights in the property and transferred those rights by agreement, with the indexed cost exceeding the sale consideration, producing a long-term capital loss as declared in the return.

Conclusion: The transfer qualifies as a transfer under the Income-tax Act, 1961 for capital gains purposes; the assessee is entitled to treat the transaction under the head capital gains and claim the long-term capital loss declared.

Ratio Decidendi: A transaction that transfers or enables the enjoyment of immovable property (including transfer of substantive rights arising from allotment and agreements short of registered possession) falls within the definition of "transfer" under the Income-tax Act, 1961 and is taxable as capital gains rather than as income from other sources where the essential attributes of a capital asset and transfer are present.

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