Prospective application of expanded transfer definition bars capital gains tax where possession passed before the amendment took effect.

An amendment enlarging the definition of "transfer" for capital gains applies prospectively unless expressly made retrospective, so a transaction completed by handing over possession before 1 April 1988 could not be taxed in assessment year 1988-89 under section 2(47)(v). The reassessment under sections 147 and 148 was therefore unsustainable because the decisive transfer event had occurred in an earlier year, before the amended provision came into force. Capital gains liability had to be determined by the law in force when the transfer was completed, and no taxable capital gain arose for the later assessment year.

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Issues: Whether capital gains could be brought to tax for assessment year 1988-89 on the basis of the amended definition of transfer in section 2(47)(v), where possession of the land had been handed over in an earlier year and the amendment was effective from 1 April 1988.

Analysis: The return had originally been processed under section 143(1), and reassessment was initiated under sections 147 and 148 after the assessing authority treated the transaction as a transfer falling within section 2(47)(v). The decisive fact was that possession of the land had already been delivered in an earlier assessment year, before the amendment came into force. The amendment inserting clause (v) in section 2(47) was not retrospective, and the transaction could be taxed only according to the law applicable when the transfer took place. On that basis, no capital gain arose in assessment year 1988-89.

Conclusion: The reassessment could not be sustained for capital gains in assessment year 1988-89, and the assessee succeeded.

Ratio Decidendi: An amendment enlarging the definition of transfer under the capital gains provisions applies only prospectively unless expressly made retrospective, and a transfer completed by handing over possession before the amendment cannot be taxed in a later year merely because the amendment has since come into force.

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