De facto transfer controls timing of taxable receipt of immovable property; later registration does not shift the tax year.

For taxing receipt of immovable property under section 56(2)(vii)(b)(ii), the relevant date depended on when the transferee acquired effective control and de facto ownership. The registered sale deed was executed and presented for registration on 30.03.2013, and section 47 of the Registration Act, 1908 was treated as giving the document effect from the date of execution. The transaction was also regarded as a transfer in substance under section 2(47)(vi) of the Income-tax Act because possession and consideration had been exchanged. Accordingly, receipt was taken to have occurred in the year relevant to AY 2013-14, and the later year's addition did not survive.

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Issues: Whether, for the purpose of section 56(2)(vii)(b)(ii) of the Income-tax Act, 1961, the immovable property was received by the assessee in the previous year relevant to assessment year 2013-14 or in the previous year relevant to assessment year 2014-15, having regard to the execution of the sale deed on 30.03.2013 and its registration on 24.04.2013.

Analysis: The provision taxed receipt of immovable property for inadequate consideration, and the controversy turned on when such receipt occurred. The registered sale deed, though completed in law upon registration, was executed and presented for registration on 30.03.2013. The law on transfer under section 2(47) of the Income-tax Act, 1961 was applied in its broad sense, and the distinction between de jure title and de facto control was treated as material. Section 47 of the Registration Act, 1908 was read as giving the registered document operation from the date of execution, while the transaction was also viewed as a de facto transfer under section 2(47)(vi) of the Income-tax Act, 1961 because possession and consideration had been exchanged and the assessee obtained effective control over the property.

Conclusion: The property was held to have been received on 30.03.2013 in the previous year relevant to assessment year 2013-14, so section 56(2)(vii)(b)(ii) of the Income-tax Act, 1961 was not applicable for assessment year 2014-15 and the addition was rightly deleted.

Ratio Decidendi: For taxing receipt of immovable property under section 56(2)(vii)(b)(ii) of the Income-tax Act, 1961, the relevant receipt occurs when the transferee acquires de facto ownership and effective control pursuant to execution of the conveyance, and a later registration does not shift the taxable event to the later year where the transaction has already crystallised in substance.

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