1977 (3) TMI 73 - AT - Income Tax

Summary

Issues:
1. Interpretation of the term "transfer" under section 2(47) of the IT Act, 1961.
2. Application of section 54-B(ii) regarding exemption from capital gains.
3. Analysis of the legal rights conferred by an agreement of sale in determining extinguishment of rights in the property.

Analysis:

1. The primary issue in this case revolves around the interpretation of the term "transfer" under section 2(47) of the IT Act, 1961. The disagreement between the assessee and the Revenue is whether an agreement of sale constitutes a transfer within the meaning of the statute. The Revenue argues that a contract of sale does not create any interest or charge on the property, hence no extinguishment of rights. In contrast, the assessee contends that the agreement of sale resulted in the extinguishment of certain rights, thereby constituting a transfer.

2. The second issue pertains to the application of section 54-B(ii) concerning exemption from capital gains. The provision states that if agricultural land used by the assessee is transferred, and within two years, new agricultural land is purchased, there is no liability to capital gains if the amount is less than the cost of the newly acquired land. The dispute arises regarding whether the sale of agricultural land preceded the purchase of new land, thus determining the applicability of the exemption.

3. Lastly, the analysis delves into the legal rights conferred by the agreement of sale to ascertain the extinguishment of rights in the property. The Tribunal examines the contractual obligations imposed on the purchaser, which restrict the seller's right of alienation, possession, and enjoyment of the property. By evaluating the cumulative effect of these obligations, the Tribunal concludes that the agreement resulted in the extinguishment of some rights of the assessee in the property, qualifying as a transfer under section 2(47) and invoking the exemption under section 54-B(ii).

In conclusion, the Tribunal dismisses the appeal, upholding that the agreement of sale constituted a transfer within the statutory definition, and the conditions for exemption from capital gains under section 54-B(ii) were met due to the sequence of the sale and purchase transactions.