The definition of ‘Transfer’ in section 2(47) of the Income Tax Act of 1961 is broad and should be interpreted broadly. It should be noted that the term “transfer” is used in connection with the transfer of a “capital asset” for Income Tax purposes. Certain transactions of capital asset transfer may have been specifically included in the definition of ‘transfer,’ but the transactions that are commonly understood as ‘transfer’ are also covered by the definition. The term “transfer” is defined in Section 2(47) of the Income Tax Act of 1961, as under:
Unless the context otherwise requires, the term “transfer”, in relation to a capital asset, includes-
(i) the sale, exchange or relinquishment of the asset; or
(ii) the extinguishment of any rights therein; or
(iii) the compulsory acquisition thereof under any law; or
(iv) in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment; or
(iva) the maturity or redemption of a zero coupon bond; or
(v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882); or
(vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property.
1. For the purposes of sub-clauses (v) and (vi), “immovable property” shall have the same meaning as in clause (d) of section 269UA.
2. For the removal of doubts, it is hereby clarified that “transfer” includes and shall be deemed to have always included disposing of or parting with an asset or any interest therein, or creating any interest in any asset in any manner whatsoever, directly or indirectly, absolutely or conditionally, voluntarily or involuntarily, by way of an agreement (whether entered into in India or outside India) or otherwise, notwithstanding that such transfer of rights has been characterised as being effected or dependent upon or flowing from the transfer of a share or shares of a company registered or incorporated outside India.
From above definition, we can understand that the term ‘Transfer’ under the Income Tax is mainly important to work out tax liability arising under the head capital gains from transfer of a capital asset.
Residential Property in Mumbai purchased under construction in Oct 2012 and agreement to purchase was entered with builder and registered in Sept 2014, followed with flat possession in Apr 2017. Considering the above act, the transfer of right on the flat has already been transferred when the agreement was registered and stamp duty and registration fees was paid to government. From that day the right and the ownership of the property lies with the buyer. However, for formality a document was signed in Apr 2017 and keys were handed over to buyer and a possession of the property was handed over. In view of above case, what date should be taken to calculate the capital gains?
In this case others conditions were also to be seen, whether the payment in regard to the purchase of the property was made in full or not, unless the payment were made in full the buyer cannot able to enjoy the all the rights a owner of property might have. so unless the purchaser of property is not able to get and enjoy the absolute right of ownership we cannot say the transfer is complete.
To avail exemption of tax on capital gain under section 54 of IT, whether it is compulsory to purchase construction completed residential property. Or sale of agreement by paying full cost of under construction flat will do.