Capital gains on registered property transfer taxed when effective conveyance occurs; section 50C valuation applied with one-fourth share apportionment.

Capital gains on immovable property arise when transfer is effectively completed under section 2(47) of the Income-tax Act, 1961; an earlier unreflected banakhat and absence of proved possession transfer did not shift the taxable event. The registered sale deed was therefore treated as the operative transfer, making the legal heirs chargeable in that year. For computation, stamp duty valuation under section 50C was applied and the assessee's taxable exposure was confined to one-fourth, consistent with her share among four legal heirs. The appellate computation was accepted and no further enhancement was made.

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Issues: (i) Whether the transfer of the immovable property took place in the year of the registered sale deed so as to attract capital gains tax in the hands of the legal heirs; (ii) Whether the capital gain had to be computed by adopting the stamp duty valuation under section 50C and restricting the taxable share to one-fourth in accordance with the assessee's share.

Issue (i): Whether the transfer of the immovable property took place in the year of the registered sale deed so as to attract capital gains tax in the hands of the legal heirs.

Analysis: The earlier banakhat was not reflected in the registered sale deed, no capital gain had been offered by the original owner on the alleged earlier transaction, and there was nothing to show that possession had been effectively transferred so as to bring the transaction within section 2(47) of the Income-tax Act, 1961 on the earlier date. The transfer therefore crystallised when the registered conveyance was executed, and the legal heirs, including the assessee, became chargeable to tax on the transfer made in that year.

Conclusion: The transfer was taxable in the year of the registered sale deed and the assessee's liability to capital gains tax was upheld.

Issue (ii): Whether the capital gain had to be computed by adopting the stamp duty valuation under section 50C and restricting the taxable share to one-fourth in accordance with the assessee's share.

Analysis: The computation accepted by the appellate authority proceeded on the basis that the stamp valuation could be applied under section 50C of the Income-tax Act, 1961 and that the assessee, being one of four legal heirs, was taxable only on one-fourth of the assessed capital gain. The tribunal found that this computation correctly reflected the consideration structure and the relevant valuation adopted for the transfer.

Conclusion: The computation adopted by the appellate authority was affirmed and the taxable capital gain was limited to the assessee's one-fourth share.

Final Conclusion: The assessee remained liable to capital gains tax on the transfer of her share in the property in the relevant year, while the Revenue did not succeed in seeking any further enhancement of the assessed amount.

Ratio Decidendi: In the absence of an effective transfer under section 2(47) at the earlier stage, capital gains arise on the registered transfer, and where section 50C applies the taxable consideration may be determined on the stamp valuation basis with apportionment according to the assessee's lawful share.

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