Deemed transfer under capital gains law: later sale deed could not trigger a second taxable event

Capital gains were held to arise when the assessee and co-owner entered into the development arrangement, executed an irrevocable power of attorney, received consideration and handed over possession, because those facts attracted the deeming fiction of transfer under section 2(47)(v) read with section 53A of the Transfer of Property Act. The later sale deed executed in 2007 was treated as a mere technical formality and not a fresh transfer giving rise to a second taxable event. Since the Revenue had already assessed the transaction as a transfer in assessment year 2004-05, the capital gains could not be taxed again in assessment year 2007-08 and the addition was unsustainable.

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Issues: Whether the capital gains arising from the transaction were taxable in assessment year 2007-08 or whether the transfer had already taken place, and been assessed, in assessment year 2004-05.

Analysis: The transaction was found to have been completed when the assessee and co-owner entered into the development arrangement, executed the irrevocable power of attorney, received the consideration, and handed over possession. Those facts attracted the deeming fiction of transfer under section 2(47)(v) of the Income-tax Act read with section 53A of the Transfer of Property Act. The later execution of the sale deed in 2007 was held to be only a technical formality and not a fresh transfer giving rise to a second taxable event. The Revenue had already treated the transaction as a transfer in assessment year 2004-05 and assessed capital gains accordingly.

Conclusion: The capital gains could not be taxed again in assessment year 2007-08, and the addition made by the Assessing Officer was unsustainable.

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