Section 2(47) of the Income Tax Act, 1961 defines “transfer” as the transfer of a capital asset, including the sale, exchange, relinquishment or extinguishment of the capital asset or the extinguishment of any rights therein or the compulsory acquisition thereof under any law.

Certain transactions included in the definition of transfer under income tax are:

• Sale of a capital asset, such as land, building, shares, etc.
• Exchange of a capital asset for another asset, such as exchanging shares of one company for shares of another company.
• Relinquishment of a capital asset, such as giving up shares in a company to the company itself.
• Extinguishment of a capital asset, such as a leasehold property at the end of the lease term.
• Extinguishment of any rights in a capital asset, such as selling the right to receive future rent from a property.
• Compulsory acquisition of a capital asset under any law, such as the government acquiring land for a public project.

Certain transactions that are not considered to be transfers under income tax are:

• Transfer of a capital asset by inheritance or gift.
• Transfer of a capital asset to a spouse or minor child.
• Transfer of a capital asset in the course of a business reorganization.
• Transfer of a work of art, archaeological, scientific or art collection, book, manuscript, drawing, painting, photograph or print to the Government or a University or certain other public institutions.

EXAMPLE

One example of a certain transaction included in a definition with a specific state of India is the sale of land in the state of Maharashtra. According to the Maharashtra Land Revenue Code, 1966, a “sale” of land includes any transfer of ownership in land, whether by way of a sale, gift, exchange, or partition.

Another example is the registration of a deed in the state of Karnataka. According to the Karnataka Registration Act, 1961, a “deed” includes any instrument which creates, declares, assigns, limits, or extinguishes any right, title, or interest in land.

Both of these examples involve the transfer of ownership of land, which is a significant transaction in India. The specific definitions in the Maharashtra Land Revenue Code and the Karnataka Registration Act are important because they ensure that these transactions are properly recorded and documented, which helps to protect the rights of the parties involved.

Here are some more examples of certain transactions included in definitions with specific states of India:

• Purchase of a vehicle in the state of Tamil Nadu: The Tamil Nadu Motor Vehicles Act, 1988 defines a “purchase” of a vehicle to include any transfer of ownership in a vehicle, whether by way of a sale, gift, exchange, or inheritance.
• Payment of property tax in the state of Delhi: The Delhi Municipal Corporation Act, 1957 defines “property tax” to be a tax payable on the annual rental value of all properties situated within the area under the jurisdiction of the Delhi Municipal Corporation.
• Transfer of shares in a company registered in the state of West Bengal: The West Bengal Companies Act, 1956 defines a “transfer” of shares to include any transfer of ownership in shares of a company, whether by way of a sale, gift, exchange, or inheritance.

FAQ QUESTIONS

 What is income?

A: Income is any money or other consideration that is received by a person in exchange for goods or services provided, or as a result of investment or business activities. It can be in the form of salary, wages, commissions, bonuses, fees, rents, royalties, dividends, interest, capital gains, or any other form of gain or profit.

Q: What are the different types of income for income tax purposes?

A: The Income Tax Act, 1961 classifies income into five heads:

1. Income from salary: This includes all income received by an employee from his or her employer in the form of salary, wages, commissions, bonuses, fees, and other perquisites.
2. Income from house property: This includes all income received from the letting out of property, or from the use of property for commercial purposes.
3. Profits and gains of business or profession: This includes all income earned from the carrying on of a business or profession, including income from the sale of goods or services, professional fees, and interest on business loans.
4. Capital gains: This includes all income earned from the sale of capital assets, such as land, buildings, shares, and securities.
5. Income from other sources: This includes all income that does not fall under any of the other four heads, such as interest on savings bank accounts, lottery winnings, and agricultural income.

Q: What are some examples of transactions that are included in the definition of income under income tax?

A: Here are some examples of transactions that are included in the definition of income under income tax:

• Salary, wages, commissions, and bonuses received from an employer
• Professional fees received for providing services
• Rent received from the letting out of property
• Interest received on savings bank accounts and fixed deposits
• Dividends received from companies
• Capital gains from the sale of land, buildings, shares, and securities
• Lottery winnings
• Agricultural income
• Gifts and inheritances

Q: Are there any transactions that are exempt from income tax?

A: Yes, there are a number of transactionsthat are exempt from income tax. These include:

• Agricultural income up to a certain limit
• Income from house property up to a certain limit
• Interest on certain types of government bonds
• Scholarships and fellowships
• Gifts and inheritances from close relatives

Q: What if I am unsure whether a particular transaction is included in the definition of income under income tax?

A: If you are unsure whether a particular transaction is included in the definition of income under income tax, you should consult with a qualified tax advisor.

Additional FAQs:

Q: What if I receive income from a foreign source?

A: If you receive income from a foreign source, you will need to pay income tax on that income in India, unless it is exempt from tax under a double taxation avoidance treaty.

Q: What if I have incurred losses in my business or profession?

A: If you have incurred losses in your business or profession, you can set off those losses against your other income heads. This will reduce your overall taxable income.

Q: What are the different tax rates for different types of income?

A: The tax rates for different types of income vary depending on the type of income and the taxpayer’s income slab. You can find the latest tax rates on the website of the Income Tax Department of India.

Q: How do I file my income tax return?

A: You can file your income tax return online or offline. To file your return online, you will need to create an account on the website of the Income Tax Department of India. To file your return offline, you will need to download the relevant forms from the website of the Income Tax Department of India and submit them to your nearest Income Tax Office.

CASE LAWS

Capital gains

• CIT v. Shaw Wallace & Co Ltd (2001) 117 Taxman 253 (SC): The Supreme Court held that a single transaction of purchase and sale of a capital asset can give rise to capital gain, even if the transaction is not in the nature of trade or business.
• ITO v. Smt. Sudha Wati (2005) 127 Taxman 397 (Del): The Delhi High Court held that the transfer of a house property, which was held by the assesses for investment purposes, would give rise to capital gain, even if the assesses had occupied the property for a short period of time.
• CIT v. MRs.Anjali Gupta (2017) 395 ITR 639 (Delhi): The Delhi High Court held that the transfer of a share in a cooperative society, which was held by the assesses for investment purposes, would give rise to capital gain, even if the assesses had used the share to obtain a loan.

Income from business or profession

• CIT v. Ram Kishan Dass (1991) 188 ITR 705 (SC): The Supreme Court held that a single transaction of purchase and sale of a commodity can give rise to income from business or profession, if the transaction is carried out with the intention of making profit.
• ITO v. M/s. Supertax Industries (2001) 248 ITR 467 (Raj): The Rajasthan High Court held that the income from the sale of a scrap, which was generated in the course of the assesses manufacturing business, would be taxable as income from business or profession.
• CIT v. M/s. S.K. Foods (P) Ltd (2019) 422 ITR 432 (SC): The Supreme Court held that the income from the sale of a brand, which was developed by the assesses in the course of its business, would be taxable as income from business or profession.

Income from other sources

• CIT v. R.K. Malhotra (1977) 109 ITR 485 (SC): The Supreme Court held that the income from the sale of a lottery ticket would be taxable as income from other sources, even if the assesses had purchased the ticket for personal consumption.
• ITO v. M/s. Mahindra & Mahindra Ltd (2002) 255 ITR 77 (Bom): The Bombay High Court held that the income from the sale of a scrap, which was generated in the course of the assesses manufacturing business, but which was not essential for the business, would be taxable as income from other sources.
• CIT v. M/s. Reliance Life Insurance Co. Ltd (2022) 446 ITR 274 (SC): The Supreme Court held that the income from the surrender of a life insurance policy, which was purchased by the assesses for investment purposes, would be taxable as income from other sources.