Prospective amendment to transfer definition barred capital gains on a pre-1988 agreement to sell with possession.

The insertion of clause (v) in section 2(47) was treated as prospective only, so an agreement to sell with delivery of possession in 1976 could not be brought within the amended definition of transfer for capital gains purposes. The transaction had to be examined under the law then in force, and on those facts no taxable transfer within section 2(47) was established for the year under consideration. As a result, the capital gains addition was not sustainable and the Revenue's appeal failed.

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Issues: Whether the amendment inserting clause (v) in section 2(47) of the Income-tax Act, 1961 applied retrospectively so as to treat an agreement to sell and delivery of possession made in 1976 as a transfer chargeable to capital gains in the year under appeal.

Analysis: The relevant transaction consisted of an agreement to sell and handing over of possession in 1976, which fell well before the amendment brought into force with effect from 1 April 1988. The amended definition of transfer, including part-performance under section 53A of the Transfer of Property Act, 1882, was held to operate only prospectively and not to fasten tax liability on transactions completed prior to its commencement. On the facts, the transfer, if any, had to be tested under the law then prevailing, under which no taxable transfer within the meaning of section 2(47) was established for the year in question.

Conclusion: The amendment did not apply retrospectively, and the capital gains addition was not sustainable; the Revenue's appeal failed.

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