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    As per section 45 of ITA, 1961 income from transfer of capital asset is chargeable to tax under the head Capital Gains in the year in which transfer took place. This section is subject to provisions of Section 54/54B/54D/54EC……


    Assessee can claim deduction or exemption for capital gain arising on transfer of capital asset by investing or purchasing a new asset referred to in various sections mentioned in Section 54/54B/ 54D/54 EC etc.


    Section 2(47) which defines the word ‘transfer’ in the context of capital asset provides that allowing the possession of immovable property by contract of nature referred to in section 53A of Transfer of Property Act1 is chargeable to tax in the hands of transferor.


    Whether buyer or transferee take reference to the above definition and claim exemption under the head capital gain by taking possession of the immovable property without registered sale deed.


    Judicial Analysis:


    86 217- Chandigarh Tribunal Anil Bishnoi vs Ass. CIT




    Assessee sold for a consideration of Rs. 1,29,00,000/- and claimed deduction U/S 54B by purchasing agricultural lands one worth of Rs. 28,84,500/- through registered sale deed and other one of Rs. 1,00,00,000/- through agreement to sell which is not registered.


    Assessing Officer has denied exemption in relation to the investment of Rs. 1,00,00,000/- on the contention that the purchase was not registered. He further contended that to claim exemption the assesse should buy the property through a registered deed. He further observed that the word purchase is not akin to the word transfer as defined U/S 2(47).


    Assessee contended that entire purchase consideration is paid through cheque and possession of the land is taken by him with right to use the land or to sell it further.


    The assessee has file an appeal against the order of AO before CIT(A). The CIT(A) upheld the order passed by the AO.


    Further assessee has filed an appeal before tribunal against the order of CIT(A).





    C.S.ATWAL vs CIT 59 359 the Punjab and Haryana High Court held that the provisions of section





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    The ITAT held that if capital gains are deemed to have been earned by the assessee on transfer of land as per the provisions of Section 2(47) of the Act, as per which the registration of the sale deed is not necessary, the consequences are that the seller or the assessee is said to have transferred his right in property and consequently those rights are acquired by the transferee;


    If in the case of transferor, the same is to be treated as sale, then, we do not find any reason to give a different meaning to the word 'Purchase'. If someone has sold a property, consequently the other person has purchased the said property. If the transfer of property is complete as per the definition of transfer u/s 2(47) of the Act, the assessee is made labile to pay tax on the capital gains earned by him, on the same analogy, the transfer is also complete in favour of the purchaser also.


    Gulshan Malik vs CIT 223 Taxman 243 – DELHI HIGH COURT


    Facts: -


    The assessee and his wife had booked an apartment by payment of certain amount and buyer’s agreement was executed. Subsequently, assessee has entered into an agreement to sell to sell their booking rights or interest in the apartment.


    The AO treated the income from transfer of allotment rights as ‘Short Term Capital Gain’ and denied exemption U/S 54 on reinvestment. The CIT(A) and ITAT upheld the order of the AO.


    The High Court held that enjoyment of property as well any interest in any of transferable capital asset was included within the ambit of ‘Capital Asset’. Even booking rights or rights to purchase the apartment or to obtain its letter was also capital asset.


    Sanjeev Lal vs CIT- 46 300- Supreme Court


    Facts: -


    The assessee has acquired a residential property in terms of will executed by his grandfather. The assessee has entered into an agreement to sell in respect of the said property and received certain amount by way of earnest money. However, the sale deed was executed later and purchased a new residential house beyond one year from the date of executing the sale deed but the new purchase was within in one year prior to the date of executing the agreement to sell.


    The AO held that the assessee was not entitled to deduction U/S 54 considering the date of execution of sale deed.


    Assessee filed an appeal before CIT(A) who upheld the order of AO. Later the ITAT and High Court also upheld the decision of AO.









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    Important aspect of acquisition of asset under the head Capital Gain



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    The Honorable Supreme Court held that “even after executing an agreement to sell an immovable property in favour of one person, tries to sell the property to another such an act would not be in accordance with law because once an agreement to sell is executed in favour of one person, the said person gets a right to get the property transferred in his favour by filing a suit for specific performance and therefore, without hesitation one can say that some right, in respect of the said property, belonging to the assessee had been extinguished and some right had been created in favour of the vendee/transferee, when the agreement to sell had been executed”.


    Looking at the provisions of section 2(47) of the Act, which defines the word "transfer" in relation to a capital asset, one can say that if a right in the property is extinguished by execution of an agreement to sell, the capital asset can be deemed to have been transferred.


    Conclusion: - Considering the harmonious construction of the provisions which subserve the object and purpose should also be made while constructing any provisions of the Act and more particularly when one is concerned with the exemption from payment of tax.


    The definition of the word transfer which provides that allowing the possession of immovable property in part performance of contract nature is chargeable to tax the same analogy can applied while claiming the exemption U/S 54/54B/ 54F etc. where by buyer has taken possession of immovable property but the registration of sale deed was not done.

    SBS WIKI E Journal Oct 2017

    Key Topics Covered:

    • AUDIT
    • GST

    This article is contributed by Partners of SBS and Company LLP - Chartered Accountant Company. You can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it.

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    SBS DIGEST E Journal Oct 2017

    Key Topics Covered:

    • AUDIT


    • COMPANIES ACT, 2013

    This article is contributed by Partners of SBS and Company LLP - Chartered Accountant Company. You can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it.

    SBS I 8th Edition

    Brief of Update: 

    This update pertains to pertains to release of press release as a consequence of 22nd GST Council Meeting at New Delhi. 

    The highlights of 22nd GST Council meet are as under: 

    Composition Scheme: 

    1. Threshold for availing composition scheme has been increased to 1 Crore from existing 75 lakhs. Hence, all dealers whose aggregate turnover in the preceding year is less than 1 crore, can opt for composition till 1 Crore of turnover for the period ended 03.2018. The scheme shall be available to new and migrated assesses. 
    1. Any person who is engaged in provision of exempted services was earlier made ineligible for opting for composition However, the Council has decided to allow such per- sons to opt for composition even they are providing exempt services. Please note all other conditions regarding eligibility for composition has to be satisfied. 

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    SBS I 7th Edition

    Brief of Update:

    This update pertains to release of notifications and circular regarding providing relaxation from furnishing of bond for all exporters and suppliers to SEZs. The summary of the notification and circular is as under: 

    The CBEC has issued a Notification No 37/2017 – CT and Circular 8/8/2017-GST dated 4th Oct, 17 regarding furnishing of Letter of Undertaking (LUT) instead of Bond. 

    Earlier, only certain class of exporters and exporters with certain turnover criterion were al- lowed to furnish LUT instead of bond along with bank guarantee for export of goods or services outside India or to a SEZ unit or developer. Now, every exporter and supplier to SEZ have been given the facility to file LUT instead of bond.

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