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Date of transfer for computing capital gain

catherine (CA Final student) (41 Points)

01 January 2016

The Date of Transfer of a capital asset is very important. For eg investment u/s 54EC in REC/NHAI Bonds is considered if such investment is made within 6 months of the month in which transfer takes place. But if consideration is recieved in March and sale deed in Court could be executed only in say April, then the financial year changes. In such a case, is the date of transfer for computing capital gain to be recokned from when consideration is received or when sale deed is executed?

Dear all

Thakyou for your replies. To all the CA Final students who replied, please refer to Pg. 7.18 of Practice Manual of Direct Taxes. Since PM for May and Nov 2016 is not available till date, I am referring to the PM of May and Nov 2015. A link for your reference is given. Check out Note no. (iii) to Q 21 and tell me, does your answer change?

https://resource.cdn.icai.org/31406sm_dtl_finalnew-vol3-may-nov14_cp7.pdf

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12 Replies

Manoj BG (Tax Professional and in Service) (1795 Points)
Replied 01 January 2016

Date of capital assets shall be the date when sale deed executed. Consideration received before execution of sale deed would be act as advance till the sale deed registered/excuted as consideration received would not transfer the ownership of the given capital asset until the same transfer of ownership documented legally. Therefore, date of transfer in your case would be April and not March provided transaction not falling within Section 45(2) to 45(6) of the Income Tax Act.

Thanks and Regards

Manoj B. Gavali

Tony John (Chartered Accountant) (6085 Points)
Replied 01 January 2016

Date of transfer of capital asset would be the date of registration of transfer deed.

Date of investment made in specified bonds is the date on which payment is made- Hindustan Unilever Ltd v. CIT [2010] 191 Taxman 119 (Bom).

Minesh Rawat (Article) (199 Points)
Replied 01 January 2016

Agree with reply of Tony John....what is important is payment for the investment made in REC/NHAI Bond

Ankit Taprania (CA FINAL ) (542 Points)
Replied 02 January 2016

Partly AGREEING AND partly DISAGREEING ALL .

in normal situation we look DATE OF REGISTRATION = DATE OF TRANSFER. BUT its not allways the same .

see when section is specifically talking about date of tranfer , we have look into its specific meaning as per income tax act .

In according to section 2(47) transfer ALSO takes place on the date on which possession of immovable property is taken in pursuance of agreement of sale .

REMEMBER PAYMENT OF SALE CONSIDERATION OF PROPERTY PLAY NO PART IN DECIDING THE DATE OF TRANSFER.

CRUX : Date of transfer will be

(a) Date of possession in pursuance of agreement of sale OR

(b) Date of registration

which ever is earlier

following possibilities arise in your case :

1. possession taken in year 1 - Date of transfer = Date of possession

2.possession taken in year 2 before reg - Date of transfer = Date of possession

3.possession taken in year 2 after Registration - Date of transfer = date of registration

and again as per Hindustan Unilever Ltd for claiming execmption u/s 54EC ,only payment for bonds withing 6 month is relevant ,

things like registration of property, allotment of bonds , issue of allotment certificate etc are irrelevant .

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Tony John (Chartered Accountant) (6085 Points)
Replied 02 January 2016

May I duly submit that as far as my knowledge goes, it is now mandatory to register sale agreement as per amendments made in Registration Act of Kerala. I don't know about other states. Hence if possession is given in pursuance of agreement to sale, I presume that such document will have to be registered too. It ia generally advised to get sale agreement also registered.

(Guest)

I agree with Ankit regarding date of transfer.

Ankit Taprania (CA FINAL ) (542 Points)
Replied 02 January 2016

I admit that " agreement to sale " also to be registered but DATE of "registration agrement to sale " has no relevance in deciding the date of transfer .

It is the date of " registration of SALE DEED " which kept relevance for date of transfer .

CA Vap Patel (Practice) (1205 Points)
Replied 02 January 2016

Income Tax Act 1961 refers Transfer of Property Act for considering date of transfer. As per Section 53A of Transfer of property Act 1882, a transfer can only be taken place on fulfillment of two essential conditions. 1) Execution of agreement and handing over of possession. It is not necessary to satisfy both conditions at the same time and in same year but only after fulfillment of both condition a valid transfer can be taken place. Hence see to it that when you have satisfied both the condition.

catherine (CA Final student) (41 Points)
Replied 02 January 2016

Thankyou sir for your answer. My question was based on the fact that many times, people pass on keys of their house to a prospective buyer on payment of an initial consideration and allow the buyer to make renovations. Subsequently, over a period of 4-6 months(generally), they get a sale deed registered in Court. Now, would the date of registeration be the date of transfer for income tax purposes, like computing Capital Gains or investing in RECL or NHAI bonds or would the initial date of consideration be considered as date of transfer as cited in CIT v C.F. Thomas (2006) 284 ITR 557 where it was held that execution of sale deed is not necessary for the purpose of charging capital gain because the transfer of right enabling enjoyment of immovable property gives rise to charge of capital gain.

Ankit Taprania (CA FINAL ) (542 Points)
Replied 02 January 2016

YES , as soon as the buyer become entitle to enjoy the rights of the property transfer is done and consequently capital gain will be taxable in that previous year does'nt matter that the registration have been made in next previous year .

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SANAJAY KAPOOR (cwa) (45 Points)
Replied 03 January 2016

i agree , once you take the possession transfer is made and capital gain is chargeable.

CA. Aditya Goel (Chartered Accountant) (681 Points)
Replied 13 January 2022

Date of Execution of Sale Deed (i.e. date mentioned on the transfer/sale deed) or the date on which its registered/registry date?
which shall be considered as date of transfer for capital gain purpose?

in my clients case - date mentioned in transfer deed is 1st august 2021 and its registered/registry date on registration certificate is 1st September 2021

which shall be the date of transfer in this case? in know there wont be any impact on computation but logically i need to understand

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