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April 2022

PART PERFORMANCE OF CONTRACT

By Dr. Anup Shah, Chartered Accountant
Reading Time 15 mins
INTRODUCTION
It is said that possession is nine-tenths of the law. Taking a cue from this maxim, s. 53A of the Transfer of Property Act, 1882 (“the Act”) has enacted the concept of part performance of a contract. This concept is based upon the law of possession.

The Income-tax Act at several places makes references to any transaction allowing the possession of any immovable property in part performance of a contract. The concept of part performance of a contract is found in s. 2(47) relating to the definition of ‘transfer’ for capital gains, s. 27 relating to the definition of ‘owner’ under House Property Income and the erstwhile s. 269UA relating to ‘transfer’ for Form 37-I. Thus, it becomes important to understand the meaning of this concept.

DEFINITION
The Supreme Court in  Shrimant Shamrao Suryavanshi vs. Pralhad Bhairoba Suryavanshi [2002] 3 SCC 676 has stated that certain conditions are required to be fulfilled if a transferee wants to defend or protect his possession under s. 53A of the Act. The necessary conditions are:

(1)    there must be a contract to transfer for consideration of any immovable property;

(2)    the contract must be in writing, signed by the transferor, or by someone on his behalf;

(3)    the writing must be in such words from which the terms necessary to construe the transfer can
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