s.2(47) — Meaning of transfer of a capital asset
The definition that decides whether anything has been transferred for capital gains, reaching beyond sale to exchange, relinquishment, extinguishment of rights, part performance and arrangements that enable enjoyment of immovable property.
Income-tax Act, 1961
s.2(47)
Income-tax Act, 2025
s.2(109)
In force from 1 April 2026, but s.536(2)(c) preserves the 1961 Act for tax years beginning before that date.
In short
Section 2(47) of the Income-tax Act, 1961 provides that transfer, in relation to a capital asset, includes the sale, exchange or relinquishment of the asset in clause (i), the extinguishment of any rights in it in clause (ii), compulsory acquisition in clause (iii), conversion into stock in trade in clause (iv), maturity or redemption of a zero coupon bond in clause (iva), any transaction allowing possession of immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 in clause (v), and in clause (vi) any transaction, whether by becoming a member of or acquiring shares in a co-operative society, company or association of persons, or by any agreement or arrangement, which has the effect of transferring or enabling the enjoyment of any immovable property. Explanation 1 takes the meaning of immovable property for clauses (v) and (vi) from section 269UA(d). Explanation 2 declares that transfer includes, and shall be deemed always to have included, parting with an asset or any interest in it, or creating any interest in it, directly or indirectly, absolutely or conditionally. The definition fixes the event; the year of charge follows from section 45(1), except where section 45(5A) moves it to the year of the completion certificate. The Supreme Court held in Grace Collis (February 2001) that extinguishment of rights need not be consequent on a transfer to someone else, and in Balbir Singh Maini (October 2017) that after the 2001 amendment an unregistered agreement has no effect for section 53A and so cannot found clause (v). The counterpart in the Income-tax Act, 2025 is section 2(109), which re-letters the clauses: part performance is clause (g), the membership and enjoyment clause is clause (f), the indirect transfer Explanation becomes clause (h) without the words "shall be deemed to have always included", and immovable property is defined in the clause itself: land or a building, including any rights in it, and rights in land or a building constructed or to be constructed arising from any transaction, such as becoming a member of or acquiring shares in a co-operative society, company or other association of persons, or any agreement or arrangement, other than a sale, exchange or lease of that land or building; the words are those of section 269UA(d), Explanation included.
What the provision does
Defines the events that count as a transfer of a capital asset, extending well beyond sale to exchange, relinquishment, extinguishment of rights, possession under a part performance contract and arrangements that enable enjoyment of immovable property. It does not fix the year of charge, the consideration or the cost, and it does not say whether a member whose flat is rebuilt by a developer has transferred anything; that is left to the clauses and the case law.
Threshold questions
- What is the capital asset, and whose is it: the member's flat, the society's land and development potential, a tenancy right, or a right to a flat under construction
- Has any right been extinguished, exchanged or relinquished, or does the holder's ownership continue in substituted premises
- Is the agreement registered, does it fix a consideration, and has the developer taken possession as transferee in part performance or only as a licensee to build
- Does the agreement defer surrender of the old premises until possession of the new ones is delivered
- Does the arrangement give the developer enjoyment as a purported owner, which is what clause (vi) requires
- For a tax year beginning on or after 1 April 2026, which re-lettered clause of section 2(109) of the 2025 Act is relied on
In practice
The recurring disputes.
Whether a society member transfers the old flat at all
The Mumbai Tribunal in Rajesh Shamji Furia (ITA 1672/Mum/2026, 16 July 2026) held at paragraph 10 that a redevelopment scheme does not result in extinguishment of the owner's proprietary rights followed by acquisition of a fresh asset: ownership continues and is substituted from the old structure to the new, and the permanent alternate accommodation agreement only records the premises allotted. Urmila Jagdish Mehta (December 2025) also described the arrangement as a continuation of ownership rights, though it counted the holding from the allotment and agreement rather than from the original purchase. Both orders were deciding the holding period, not whether section 2(47) was satisfied, and Furia at paragraph 17 left open whether the holding runs from the original purchase or from the development agreement. Against that, the same Tribunal in Dilip P. Ahuja (October 2014) held that the value of the new flat and the compensation is the consideration received on giving up the old flat, with section 54 available, and Anil Dattaram Pitale (March 2025) described the arrangement as extinguishment of the old flat. The Revenue relies on clauses (i) and (ii), on Grace Collis, where the Supreme Court read extinguishment as reaching rights that end without passing to anyone, and on Kartikeya V. Sarabhai, where a shareholder who remained a shareholder still suffered a transfer when his rights were reduced. No High Court has tested either line in a member's case. The continuation view is the more recent and gives fuller reasons on the holding period, but Furia did not analyse clauses (ii), (v) or (vi), Grace Collis or Kartikeya V. Sarabhai, and the finding of the Commissioner (Appeals) in Upinder Kaur Khalsa Rao (March 2024) of a clear extinguishment and exchange within section 2(47) was left unanswered when the Tribunal deleted the hardship addition as a capital receipt. The question is open.
Part performance, registration and possession handed over for demolition
The Revenue's timing argument is clause (v): the development agreement or the member's own agreement is a contract to transfer, and the developer takes possession for demolition in part performance, so the transfer happens then. The Bombay High Court in Chaturbhuj Dwarkadas Kapadia (February 2003) held that where the contract read as a whole passes complete control to the developer, the year of the contract is the year of chargeability, and the Gujarat High Court applied the clause in Jayantilal C. Desai (April 2011) where the owner gave possession and surrendered every right, including the right to fix prices and enrol members. The answer is Balbir Singh Maini: an unregistered agreement has no effect for section 53A after 2001, and possession given only to develop the property is not enjoyment as a purported owner under clause (vi); the Court added (paragraphs 24 to 28) that where payment depended on permissions that were never obtained, no right to the consideration had accrued, so there was no gain to charge. The Gujarat High Court in Chhaganlal Mulji Dholu (November 2022), quashing a reopening notice, held that a development agreement did not itself transfer the land and that the transfer took place when the obligations were fulfilled and the sale deed executed. The Ahmedabad Tribunal held in Ashwin M. Patel HUF (February 2015) that an agreement fixing no consideration is not a section 53A contract; the Revenue appealed to the High Court, which condoned a five-day delay in filing in September 2015; no later order in the appeal was traced. Most redevelopment agreements are registered, so the registration answer often fails; whether possession given to a developer to demolish and rebuild the member's own flat is possession taken by a transferee is undecided for a society member.
When a tenant's surrender takes place
In Jigar Sevantilal Shah (April 2026) the Mumbai Tribunal held that where the tripartite agreement says the tenancy is not surrendered by handing over possession and ends only when the new premises are delivered, the taxable event can arise only in the year of delivery, and the Department cannot read the agreement differently; Snehalata Heramb Dhayagude (April 2026) said that until possession is handed over the tenancy rights are in suspension, not cessation. The Revenue's answer, not argued in either case, is that a tenant who hands vacant possession to the developer under a registered contract has allowed possession to be taken in part performance within clause (v), whatever the agreement says about surrender. The tenant has a textual reply, though a narrower one than it first appears. Clause (v) speaks of immovable property, which for that clause takes the meaning in section 269UA(d): land or a building, which by the Explanation to sub-clause (i) includes any rights therein, or rights in land or a building arising from a transaction other than a sale, exchange or lease. A tenancy arises from a lease, so it is outside the second limb. The Revenue has two replies. Clause (v) asks whether possession of immovable property was allowed, and the premises the developer takes are a building within the first limb, whatever the nature of the tenant's own interest; and a tenant's right of occupation is itself a right in the building, brought into the first limb by the Explanation. The tenant's answer is that the second limb deliberately leaves out rights arising from a lease, and reading them back in through the first limb would defeat that exclusion. Section 2(109) of the 2025 Act writes the same words into the clause itself, so the position does not change for tax years from 2026-27. In Vasantha Narayan Poojari (March 2026), the case of an owner of premises run as a motor garage and not a tenant's, the Tribunal, in a merits passage that was obiter because the reopening failed, observed that he transferred the premises in 2012, when he accepted the developer's offer letter of 17 November 2011 and vacated, and valued what he received under section 56(2)(vii)(b) at 2011 and 2012 rates, not 2017 rates. For now the drafting of the surrender clause decides most of these cases.
Who transfers, the society or the members
Where the society owns or leases the land and signs the development agreement, the Revenue argues that the development potential belongs to the land, so the society is the transferor and the sums paid to members are an application of its receipt. The Mumbai Tribunal has rejected that where the agreement routes the consideration to named members: RBI Employees Bhagvati CHS (October 2025) held at paragraph 12 that the society signed as representative of the flat owners, and Colombia CHS (December 2025) relied on Circular 9 of 25 March 1969, which says that the individual members of a tenant co-partnership society should be regarded as the legal owners of their flats. The circular was written for income from house property and says nothing of the land or its development potential, which is where the Revenue still presses. The Bombay High Court dismissed the Revenue's appeal in MIG CHS Group II on 14 February 2024, noting that its special leave petition in Raj Ratan Palace had been dismissed on 28 October 2013. The Mumbai Tribunal decides the point consistently for the members, and the Bombay High Court declined to interfere where the Revenue did not question the facts; the outcome turns on proof that members received and offered the money: in MIG CHS Group II for assessment year 2014-15 (December 2025) the society's addition was remanded for that verification. Hardinge House CHS (ITA 3050/Mum/2026, assessment year 2016-17, August 2026) deleted on the merits an addition of Rs 18,40,18,300 to a society that had received no part of the consideration. The addition was the stamp value of the development agreement the society had itself signed (Rs 13,95,86,500) and of seven members' permanent alternate accommodation agreements, to which it was a party (only a confirming one, it submitted). The Tribunal deleted the development agreement element as well, holding at paragraph 5.3 that the society signed that agreement for and on behalf of its members, under the directive issued under section 79A of the Maharashtra Co-operative Societies Act, 1960, and that tax liability cannot be foisted on another entity when the rights in the flats belong to the individual members. It also relied on the reassessment for the following year having been dropped on identical agreements. The Revenue can point to the same paragraph's statement that the society "merely holds the legal title to the land/building as a collective representative of its members": on its case, that title is what carries the development potential.