The capital gain is deemed to be the income of the previous year in which the transfer takes place. As such any capital gain should be assessed in the assessment year corresponding to the previous year in which transfer took place.
A transfer does not take place merely because an agreement has been entered into or consideration is paid there under in whole or in part. The words “effected in the previous year” in section 45 denote that the title in the property has passed from the transferor to the transferee. No transfer can be said to be effected till all the formalities for transferring the title to the transferee are not completed.
The following rules can be framed in this connection
(i) In respect of transaction concerning immovable property worth 100 or above, no capital gain can be charged to tax so long as there is no registration deed or transfer—though possession might have been given to the buyer.
(ii) The charge of capital gain arises only when there has been a duly executed and registered deed of transfer.
(iii) The year of assessment would be the year corresponding to the previous year in which such transfer is completed.
(iv) Whether the consideration is paid at the time of transfer or made payable in future, is immaterial, the charge will be levied in the year in which transfer of title takes place.