The advance ruling authority has delivered its ruling (Reported in 2007 -TMI - 2120 - AUTHORITY FOR ADVANCE RULINGS) while deciding the matter of chargeability of Income Attributable to Capital Gains under collaboration agreements under Income Tax Act, 1961.

The summary of the discussions and finding are as follows:

1. Where the agreement for transfer of immovable property by itself does not provide for immediate transfer of possession, the date of entering into the agreement cannot be considered to be the date of transfer within the meaning of clause (v) of section 2(47) of the Income-tax Act.

2. To attract clause (v) of section 2(47), it is not necessary that the entire sale consideration up to the last installment should be received by the owner.

3. In the instant case, having regard to the terms of the two agreements and the irrevocable GPA executed pursuant to the agreement, the execution of the GPA shall be regarded as the "transaction involving the allowing of the possession" of land to be taken in part performance of the contract and therefore, the transfer within the meaning of section 2(47)(v) must be deemed to have taken place on the date of execution of such GPA. The irrevocable GPA was executed on May 8, 2006, i.e during the previous year relevant to the assessment year 2007-08 and the capital gains must be held to have arisen during that year. Incidentally, it may be mentioned that during the said year, i.e., financial year 2006-07, a final licence was granted and the applicant/owners received nearly 2/3rds of the consideration.

4. Once it is held that the transaction of the nature referred to in clause (v) of section 2(47) had taken place on a particular date, the actual date of taking physical possession need not be probed into. It is enough if the transferee has by virtue of that transaction a right to enter upon and exercise the acts of possession effectively. 

(For full text of Ruling - please visit - 2007 -TMI - 2120 - AUTHORITY FOR ADVANCE RULINGS)

Capital gains recognition triggered when transferee obtains right to possession via irrevocable GPA, not upon physical delivery. An instrument that vests in the transferee the right to enter upon and exercise acts of possession - such as an irrevocable general power of attorney executed under the agreement - constitutes the transaction allowing possession and fixes the date of transfer for capital gains; the agreement date or physical delivery is not decisive, and receipt of the full consideration is not a precondition for clause (v) to operate.