Prospective scope of transfer definition under income tax law precluded capital gains on an incomplete land transaction.

For assessment year 1985-86, an alleged land transfer on 7 December 1984 did not constitute a taxable transfer under section 2(47) of the Income-tax Act, 1961 as then in force, because the later-amended provisions covering section 53A-type transactions were not yet applicable. The Finance Act, 1987 amendment operated prospectively from 1 April 1988, so an unregistered or incomplete transaction could not be taxed as a capital gains transfer on that date. The reasoning that capital gains on compulsory acquisition arise only on receipt of compensation was also irrelevant on these facts. No capital gains were chargeable on the alleged transfer.

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Issues: Whether, for assessment year 1985-86, the alleged transfer of land on 7 December 1984 amounted to a transfer giving rise to capital gains under the Income-tax Act, 1961.

Analysis: For the relevant assessment year, the definition of transfer in section 2(47) of the Income-tax Act, 1961 did not yet include the later-amended clauses covering transactions falling within section 53A of the Transfer of Property Act, 1882. The amendment introduced by the Finance Act, 1987 was prospective and from 1 April 1988. On the facts found, the sale deed was not treated as an effective transfer for capital gains purposes, and the alleged transfer could not be taxed merely on the basis of an unregistered or incomplete transaction. The position that capital gains on compulsory acquisition would arise only on receipt of compensation also did not assist the Revenue.

Conclusion: No taxable transfer occurred on 7 December 1984 for assessment year 1985-86, and capital gains were not chargeable on that alleged transfer.

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