Section 2(47) — Transfer in Relation to Capital Assets

Section 2(47) of the Income-tax Act, 1961 defines the term 'transfer' in relation to a capital asset. This section is crucial as it determines when a capital gain is realized and thus taxable. The definition includes a wide range of transactions such as sale, exchange, relinquishment of the asset, extinguishment of any rights therein, and compulsory acquisition under any law. It also covers transactions involving the conversion of a capital asset into stock-in-trade and the maturity or redemption of zero-coupon bonds. The significance of this section lies in its broad scope, capturing various forms of asset disposals that might otherwise escape taxation. The burden of proof typically lies with the taxpayer to demonstrate that a transaction does not constitute a 'transfer' as defined. In practice, this section ensures that capital gains tax is levied on a wide array of asset disposals, thereby preventing tax avoidance.

Common Litigation Flashpoints

1. Interpretation of 'transfer' in complex transactions
2. Disputes over relinquishment or extinguishment of rights
3. Classification of transactions as transfer or non-transfer
4. Timing of transfer and corresponding tax liability

Judgments on Section 2(47) — Transfer in Relation to Capital Assets

• Union of India & Anr. vs M/s. Ganpati Dealcom Pvt. Ltd. — SC,
  The 2016 Amendment Act cannot be applied retrospectively as it creates new offences and substantive changes, which cannot be applied to past transactions.
• Sh. Sanjeev Lal Etc. Etc. vs Commissioner of Income Tax, Chandigarh & Anr. — SC,
  An agreement to sell can be considered as a transfer under Section 2(47) if it extinguishes the rights of the vendor, thus qualifying for Section 54 relief.