Capital gains transfer date turns on agreement to sell and power of attorney satisfying section 53A conditions

For capital gains purposes, the article explains that an agreement to sell and a power of attorney may amount to a transfer when they satisfy section 2(47)(v) of the Income-tax Act read with section 53A of the Transfer of Property Act. On the majority view discussed, full consideration, the terms of the agreement, and the power of attorney showed completion of the transaction on 5-9-2002, so later registration did not shift the transfer date. The contrary view treated registration and delivery of possession as decisive. The stated result was short-term capital gains treatment.

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Issues: Whether the transfer of agricultural land took place on 5-9-2002 or on 21-11-2002 for the purpose of capital gains.

Analysis: The controversy turned on whether the agreement to sell and power of attorney executed in connection with the land sale satisfied the conditions of a transfer under section 2(47)(v) of the Income-tax Act, 1961 read with section 53A of the Transfer of Property Act, 1882. The majority view held that the documents, the receipt of full consideration, the reference in the agreement to sell, and the terms of the power of attorney showed that the transaction was complete on 5-9-2002, and that registration later did not postpone the date of transfer. The dissenting view treated the date of registration and delivery of possession as decisive and found the transfer to be on 21-11-2002.

Conclusion: The transfer was held to have taken place on 5-9-2002, and the resulting gain was assessable as short-term capital gain. The appeal failed.

Ratio Decidendi: For capital gains purposes, where an agreement to sell and power of attorney executed on a given date satisfy the requirements of section 53A of the Transfer of Property Act, 1882 and effectively allow possession and enjoyment of the immovable property, the transfer is deemed to occur on the date of execution and not on the later date of registration.

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