Transfer of property for capital gains was recognised on agreement to sell, possession and full consideration despite delayed registration.

Receipt of full consideration, handing over of possession and extinguishment of rights under an agreement to sell can amount to transfer in substance for capital gains purposes, even if the registered sale deed is executed later. On these facts, the property was treated as transferred in AY 2018-19 under section 2(47)(ii) of the Income-tax Act, 1961, because the delay in registration arose from a red entry and related clearance issues beyond the assessee's control. The deduction claim under section 54 was also allowed because the new residential property had been acquired within the relevant period and the claim was otherwise not disputed.

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Issues: Whether the transfer of the immovable property took place on the date of the agreement to sell and receipt of full consideration, so that the capital gains were chargeable in AY 2018-19, and whether the assessee was entitled to deduction under section 54 of the Income-tax Act, 1961.

Analysis: The agreement to sell was executed in AY 2018-19, full sale consideration had been received by the assessee in that year, possession of the property had already stood with the purchaser, and the postponement of the registered sale deed occurred because of a red entry and related official clearance beyond the assessee's control. On these facts, the rights in the property were held to have stood transferred in substance in the relevant year, attracting section 2(47)(ii) of the Income-tax Act, 1961 by reason of extinguishment of the assessee's rights, even though the registered conveyance was executed later. Since the new property had already been acquired within the relevant period and the deduction claim was otherwise not disputed, the claim under section 54 was held allowable.

Conclusion: The capital gains were held taxable in AY 2018-19 and the assessee was held entitled to deduction under section 54 of the Income-tax Act, 1961.

Ratio Decidendi: Where the assessee has received full consideration, handed over possession, and effectively extinguished rights in the property under an agreement to sell, transfer may be regarded as having taken place in that year for capital gains purposes notwithstanding delayed execution of the registered sale deed.

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