Capital gains transfer on possession and prospective section 50C amendment determined the assessable year and sale consideration.

Capital gains were treated as arising when the sale agreement was executed and possession was handed over, because the transaction satisfied transfer under section 2(47)(v) read with section 53A of the Transfer of Property Act. On that basis, the gain was not chargeable in the later assessment year, and the addition for that year could not be sustained. The commentary also notes that the amended section 50C(1), inserting the words "or assessable," applied only from 01.10.2009 and could not be used for an earlier transfer, so the valuation adopted under that amendment was not sustainable.

---

---

Issues: (i) Whether capital gains arose in the assessment year 2010-11 or in assessment year 2009-10 on the basis of the sale agreement, possession and the applicability of section 2(47)(v) of the Income-tax Act, 1961 read with section 53A of the Transfer of Property Act. (ii) Whether the amended section 50C(1) of the Income-tax Act, 1961, inserting the words "or assessable", could be applied to the transfer in question for determining the sale consideration.

Issue (i): Whether capital gains arose in the assessment year 2010-11 or in assessment year 2009-10 on the basis of the sale agreement, possession and the applicability of section 2(47)(v) of the Income-tax Act, 1961 read with section 53A of the Transfer of Property Act.

Analysis: The transfer was held to have taken place when the sale agreement was executed and possession was given, not when the sale deed was later registered. The transaction satisfied the ingredients of transfer under section 2(47)(v) of the Income-tax Act, 1961 read with section 53A of the Transfer of Property Act. On that basis, the capital gains were held to be assessable in the earlier assessment year, and the addition made for assessment year 2010-11 could not stand.

Conclusion: The capital gains were not chargeable in assessment year 2010-11 and the assessee succeeded on this issue.

Issue (ii): Whether the amended section 50C(1) of the Income-tax Act, 1961, inserting the words "or assessable", could be applied to the transfer in question for determining the sale consideration.

Analysis: The amendment to section 50C(1) was held to be effective only from 01.10.2009. Since the transfer in the present case had occurred earlier, the amended provision could not be invoked. The valuation adopted by the Assessing Officer on the basis of the amended provision was therefore not sustainable.

Conclusion: The amended section 50C(1) was inapplicable and the assessee succeeded on this issue as well.

Final Conclusion: The Revenue's challenge to the deletion of the long-term capital gains addition failed, and the assessment of the transaction was upheld as falling in the earlier year, leaving the assessee with the benefit of the appellate relief granted by the first appellate authority.

Ratio Decidendi: For capital gains purposes, a transfer under section 2(47)(v) occurs when possession is handed over in part performance under the agreement, and an amendment enlarging section 50C by adding "or assessable" applies only prospectively from its effective date.

---