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6.    Capital Gains Are Taxable in the Year of Possession of Property and Not Transfer of Title

Under the Income Tax Law, very often a controversy arises as to when a particular property can be said to be transferred, namely when the possession of the property is handed over to the buyer or in the year in which the title of ownership is transferred. This is because the possession of an immovable property may be transferred in one particular financial year whereas the title to the property might be transferred in the next year. Hence, disputes do arise as to the taxability of the capital gains in the year of transfer of possession or transfer of title. Fortunately, the Income Tax Appellate Tribunal, Mumbai Bench in the case of Gripwell Industries Ltd v. Income tax Officer [2006] 284 ITR (AT) 188 has held that where there is an agreement of sale between the assessee and the vendee and the physical possession of the factory along with factory land, building and other assets is actually given in one financial year whereas the legal title to the property is transferred in the next financial year, the capital gains would be deemed to accrue in the year in which the possession is actually given and not in the later year when the legal transfer of title is effected. This judgment is of great importance for all persons possessing property and interested in transferring it.

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