What is Transfer in relation to Capital Asset
Section-45(1) of the Income Tax Act provides that any profits and gains arising from transfer of a capital asset effected in the previous year shall be chargeable to income tax in the previous year in which such transfer took place.
For Definition of Capital Asset, Read the following article:- https://www.taxwink.com/blog/capital-asset-under-income-tax-act
Taxability under the head “Capital Gains” shall arise only where a transfer of capital asset takes place. As such, it becomes necessary to understand how the word “Transfer” has been defined by the law. Section-2(47) of the Income Tax Act gives an inclusive definition of the term “Transfer” which is as follows: -
“Transfer” in relation to a capital asset, includes: -
(a) Sale, exchange or relinquishment of the asset or
(b) Extinguishment of any rights therein or
(c) Compulsory acquisition of an asset under any law or
(d) Conversion of capital asset into stock in trade by the owner for a business carried on by him or
(e) Maturity or redemption of a zero coupon bond
(f) Allowing possession of immovable properties to the buyer in part performance of the contract
(g) Any transaction (whether by way of becoming a member of, or acquiring shares in a co-operative society, company or AOP or by way of agreement or any arrangement) which has the effect of transferring or enabling the enjoyment of an immovable property
Explanation-1 to Section-2(47) further states that: For the purposes of sub clauses (v) and (vi) “immovable property” shall have the same meaning as in clause (d) of Section- 269UA.
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Immovable property as per clause (d) of Section 269UA means: (i) Land or building or part of a building and any rights therein |
Explanation-2 to Section-2(47):
“Transfer" includes and shall be deemed to have always included disposing of or parting with an asset or any interest therein, or creating any interest in any asset in any manner by way of an agreement (whether entered into in India or outside India) or otherwise, notwithstanding that such transfer of rights has been characterized as being effected or dependent upon or flowing from the transfer of a share or shares of a company registered or incorporated outside India;
