Handing over possession, not agreement execution, determines transfer date for capital gains and section 54 relief.

For capital gains on immovable property, actual handing over of vacant possession was treated as the operative event for transfer under section 2(47), rather than mere execution of the agreement to sell. On the admitted facts, possession was handed over on 14.05.2011, so the holding period exceeded 36 months and the gain was characterised as long-term capital gain, not short-term capital gain, for the later assessment year. As the assessee had purchased another residential flat, the claimed deduction under section 54 was also allowed.

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Issues: Whether the transfer of the flat took place only on handing over of possession on 14.05.2011 so that the gain was not assessable as short-term capital gain in assessment year 2011-12, and whether the transaction was to be treated as long-term capital gain with consequential benefit under section 54.

Analysis: The transfer was not complete merely on execution of the agreement to sell, because the agreement itself contemplated delivery of vacant possession within a short period and the actual possession letter showed that possession was handed over only on 14.05.2011. On those admitted facts, the date of possession was relevant for determining transfer under section 2(47) of the Income-tax Act, 1961. Since the flat had been acquired by the previous owner on 16.04.2008 and possession was handed over on 14.05.2011, the holding period exceeded 36 months. The gain therefore could not be treated as short-term capital gain in assessment year 2011-12, and the assessee's purchase of another residential flat entitled him to the claimed deduction under section 54.

Conclusion: The transfer was held to have taken place on 14.05.2011, the gain was directed to be assessed as long-term capital gain in assessment year 2012-13, and the assessee was held entitled to deduction under section 54.

Final Conclusion: The addition was substantially deleted by recharacterising the transaction as a long-term capital asset transfer in the later assessment year, with corresponding relief on the exemption claim.

Ratio Decidendi: For capital gains purposes in a case involving sale of immovable property, actual handing over of possession may be the ative event for transfer under section 2(47), and where that date falls beyond 36 months from acquisition, the gain is long-term and the related exemption provisions must be applied accordingly.

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