CIT v Balbir Singh Maini

Facts

• Balbir Singh Maini entered into an agreement to sell immovable property
• The sale was never completed; possession was not handed over
• The AO/CIT treated the agreement as a transfer under S.2(47)(v) read with S.53A TPA
• Capital gains were assessed on the assumption that "transfer" had occurred
• The assessee contested that no transfer took place

Issues

1. Whether a mere agreement to sell constitutes "transfer" under S.2(47)(v) of the Income Tax Act
2. Whether S.53A of the TPA (part performance) applies when possession has not been given

Held

• S.2(47)(v) imports S.53A TPA which requires: (a) a written contract, (b) the transferee taking possession, (c) in part performance of the contract
• Without actual transfer of possession in part performance, S.53A is not attracted
• A bare agreement to sell, without possession, is not a "transfer" for capital gains purposes
• No capital gains tax liability arises on an incomplete transaction

Ratio Decidendi

S.2(47)(v) is a deeming provision and must be strictly construed. It deems a transaction as "transfer" only when S.53A TPA conditions are fulfilled. S.53A requires possession to have been taken or retained. Without the possession element, the deeming fiction is not triggered. Tax cannot be levied on notional gains from incomplete transactions.