Transfer for income-tax purposes may arise without registered conveyance where possession and consideration have passed.

For income-tax purposes, transfer is determined under the Income-tax Act and is not confined to the formal requirements of the Transfer of Property Act. The commentary explains that where possession has been handed over and consideration has been paid, absence of registration of the sale deed does not by itself prevent the transaction from being treated as a transfer for capital gains or section 41(2) purposes. It also notes that the Tribunal must still examine the sale agreement as a whole to decide, on the facts, whether the transaction constitutes a transfer in substance.

---

---

Issues: Whether, for the purposes of capital gains and profit under section 41(2), registration of the sale deed is a condition precedent where possession has been given and consideration has been paid.

Analysis: The Court held that, for income-tax purposes, the concept of transfer must be examined in the light of the Income-tax Act and not confined strictly to the requirements of the Transfer of Property Act. Relying on the principle that ownership, in the income-tax context, turns on entitlement to receive income in one's own right, the Court held that where possession has been handed over and consideration has been paid, absence of registration does not by itself prevent the transaction from being treated as a transfer for taxation. The matter was, however, remitted to the Tribunal to examine the sale agreement as a whole and decide whether it constitutes a transfer on the facts.

Conclusion: Registration of the sale deed is not a condition precedent to taxing the transaction as a transfer for income-tax purposes; the issue was answered in favour of the Revenue and against the assessee.

Ratio Decidendi: For the purposes of the Income-tax Act, a transfer may be complete even without a registered conveyance if possession has been handed over and consideration has been paid, and the taxability of capital gains or balancing charge depends on whether the transaction constitutes a transfer in substance.

---