Vivek Jalan
There is a question while computation of Capital Gain or Capital loss on transfer of immovable property that incase payments were made in parts over a period, in which FY will the capital gain or loss be assessable. Further, it is important for the purpose of indexation also for the buyer. For eg. Agreement for sale of a property was made on 30.3.2013 and advances were exchanged.
However, the conveyance was executed on 30.6.2014 and possession was transferred then. The question is, whether Capital Gain would be assessable in AY 14-15 or AY 15-16. The point is that the Capital Gain is on the transfer of capital asset. Section 2(47)(v) of the Income Tax Act read with Section 53A of The Transfer of Property Act 1882 Act make it clear that transaction shall be treated as transfer only when possession has been taken or retained by buyer, in this case FY 14-15 corresponding to AY 15-16 and hence capital gain or loss should be calculated in such AY, as was held in the case of M/s ARCHEAN REALTY P. LTD. Vs THE DY. COMMISSIONER OF INCOME TAX [2023-VIL-809-ITAT-CHE]. Now another question is that say the buyer again transfers the property, then for the purpose of indexation, which AY should be considered as the base year.
Again, according to the same principles, it can be said that the base year shall be AY 15-16 itself for the purpose of indexation. Another issue raised many times is that, say in the above example, the entire consideration was paid by the buyer on 30.3.2013 after deduction of TDS u/s 194IA, then would the proposition change and the Capital Gain or Capital Loss be assessed in AY 14-15 as it would be deemed that the transfer took place in FY 13-14 itself.
The answer still will not change as the transaction shall be treated as a transfer only when possession has been taken or retained by the buyer. Since possession of property has been handed over to the buyer in FY 2014-15, relevant to AY 2015-16, the transfer would be considered to have taken place in AY 2015-16 only.
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