Completion of share transfer for capital gains depends on passing of property and delivery, not partial payment alone.

Transfer of shares under a sale agreement was treated as governed by the Sale of Goods Act, 1930, and capital gains tax under section 45 of the Income-tax Act depended on completion of the transfer in the relevant year. Because full payment was a condition precedent and the signed transfer deeds and shares were to remain with the solicitor until the balance consideration was paid, property had not passed merely on receipt of part payment or deposit of documents with the solicitor. The solicitor was a neutral custodian, not the buyer's agent, so there was no effective delivery to the transferee. As the sale was not completed during the year, the taxable event did not arise and section 45 did not apply.

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Issues: Whether the transfer of shares was completed in the year under consideration so as to attract capital gains tax under section 45 of the Income-tax Act, 1961.

Analysis: The transaction was treated as a sale of shares governed by the Sale of Goods Act, 1930. The agreement showed that full payment of the purchase price was the condition precedent for completion of the sale, and the shares with signed transfer deeds were to remain with the solicitor until the balance consideration was paid. Applying the rules on passing of property and delivery under sections 4, 19, 20, 21, 32, 33 and 35 of the Sale of Goods Act, 1930, the transfer could not be said to have taken place merely because part consideration had been received or because the documents were kept with the solicitor. The solicitor held the shares as a neutral custodian and not as the transferee's agent, so delivery to him did not amount to delivery to the buyer. Since the condition for completion of the sale was not fulfilled during the year, the taxable event had not occurred.

Conclusion: The transfer of shares had not been completed in the relevant year and section 45 of the Income-tax Act, 1961 did not apply; the Revenue's appeals failed.

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