WHAT IS DATE OF POSSESSION?

It is important to understand the meaning, in order to prevent future complications related to date of possession. The day on which the builder or purchaser of the property has agreed to hand over the property to the buyer is known as the possession date. The possession date must be specified in the sale agreement under RERA.

After the parties concerned (the buyer and seller of the property) have entered into a sale agreement, this date may be anything from a few months to a few years. To put it another way, the possession date may also be interpreted as the completion date. On the date of possession, the builder should have finished all construction works and received all required approvals, such as the Completion Certificate and Occupancy Certificate, for the buyers to begin living in the house. The possession date is the deadline for buyers to claim possession of the property from the seller or builder.

WHAT IS A SALE DEED?

A sale deed is a legal document that proves the seller has given the purchaser complete possession of the land. The new owner acquires the rights and interests in the property through this agreement. The following detail is normally used in a selling deed:

  1. Buyers and sellers’ information (name, age, and addresses)
  1. Description of the property (total area, details of construction, the exact address, and surroundings)
  1. The total value of the sale, including any advance payments made, as well as the method of payment
  1. When the land title is finally transferred to the buyer, this is the set limit.
  1. Clause of indemnity (The seller promises to pay the buyer for any damages in case of disputes with regard to the ownership, resulting in monetary losses to the buyer).

DIFFERENCE BETWEEN DATE OF SALE DEED AND DATE OF POSSESSION 

In a recent decision, the Income-tax Appellate Tribunal, Jaipur’s bench held that the date of agreement to sell would be considered as the date of transfer for the purposes of calculating the holding period provided any of the requirements specified under section 2(47) of the Income-tax Act, 1961 (the Act) have been fulfilled.

FACTS OF THE CASE-

  • The taxpayer was a firm that was in the agency business. The taxpayer had bought agricultural land from the sellers according to an agreement to sell dated April 11, 2007. According to the terms of the deal, the taxpayer was given physical ownership of the land. On April 13, 2010, the landlords executed a transfer deed in favor of the taxpayer. This occurred as a result of the transfer of land from one use to another. 
  • This occurred after the land was converted from agricultural to nonagricultural use. In ITA No. 680 & 681/JP/2017 FY 2011-12 and FY 2012-13, the taxpayer sold the property to two separate parties and taxed the gains as long-term capital gains.
  • The Tax Officer (TO) treated the date of the sale deed as the date of purchase and attempted to tax the gains as short-term capital gains rather than long-term capital gains. TO’s position was upheld by the Commissioner of Income-tax (Appeals).

ISSUE OF THE CASE-

Is it important for the assessment of transfer of land under section 2(47) of the Act read with section 53A of the Transfer of Property Act, 1882 (TOPA) if the date of execution of the sale deed against the date of agreement to sell is relevant?

DECISION OF THE COURT-

The Tribunal found that recording the agreement to sell, converting the property, and then executing the sale deed was all part of a continuous sequence that started with the agreement to sell. When a sale deed is completed in accordance with an agreement to sale and all of the provisions set out in section 2(47) of the Act are met, it constitutes a transfer that is valid from the date of the agreement to sale. 

It wasn’t a case of a transfer focused solely on unregistered documents; instead, the parties to the agreement had executed a sale deed as part of the sale agreement. As a result, the selling of immovable property is treated as a single contract involving a combined act of agreement to sale and a sale deed.

The Tribunal ruled that when an agreement was signed, a right in person was formed in favor of the vendee and the vendor was prevented from selling the land, following the Supreme Court’s decision in the case of Sanjay Lal. As a result, the transfer will be valid from the date of the agreement to the date of the sale.

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