Opinion Of Eminent Legal Luminaries On Controversial Issues

When Transfer Is Complete U/s. 2(47)?

QUERY: ‘P’ had to sold her property in order to finance her daughter’s medical expenses.

The agreement for sale was entered for Rs. 50/- lakh. She received only Rs. 35/- lakh due to dispute with the buyer. No possession of the property was given. She does not have money to invest in order to claim exemption u/s. 54. The AO passed the order levying tax on Rs. 50/- lakh. Whether AO is right?
ANSWER: In this case transfer is not complete, because of property has not been given and therefore there is no question of investing in another house to claim exemption under section 54.

In Chaturbhuj Dwarkadas Kapadia v. CIT [260 ITR 491] the Bombay High Court has held that clauses (v) and (vi) were introduced in section 2(47) of the Income-tax Act, 1961 with effect from April 1,1988. They provide that transfer includes (i) any transaction which allows possession to be taken/retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1982 and (ii) any transaction entered into in any manner which has the effect of transferring or enabling the enjoyment of any immovable property. Till then, no liability to capital gains arise.

The Bombay High Court reiterated the aforesaid view in CIT v. Geetadevi Pasari [17 DTR (Bom) 280]. The Court held that the relevant assessment year for the purpose of computation of capital gains will be the assessment year in which the assessee was actually put in possession.

Thus, on the basis of above judgments it is clear that AO is not right in levying tax on Rs. 50/- lakh.
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