Share transfer completion governs section 47(v) relief where approval and delivery of transfer documents occur later.

Transfer of shares is completed only when the contractual conditions are fulfilled, approval is obtained, and the transfer deeds and share certificates are delivered; an agreement to sell does not by itself complete the sale. Applying that principle, the shares were treated as transferred on the later effective date, when the holding company relationship existed, so the transaction fell within section 47(v) and capital gains were not taxable. The contention that the arrangement was a colourable device was rejected because the sequence of events was regarded as genuine and legally effective, and the CBDT circular could not override the statutory position.

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Issues: Whether the transfer of shares was completed on the date of the agreement to sell or only on the later date when the Central Government approval was obtained, transfer deeds were executed, share certificates were delivered and consideration was received, and whether the assessee was entitled to the exemption under section 47(v) of the Income-tax Act, 1961.

Analysis: The arrangement was subject to approval under section 372 of the Companies Act, 1956 and further required execution and delivery of the transfer instrument and share certificates. Under the Sale of Goods Act, 1930, an agreement to sell does not amount to a completed sale until the contractual conditions are fulfilled and the property in the goods passes. The transfer of shares was therefore held to be completed only when the approval was obtained and the transfer was actually effected. On that date the holding company relationship was in existence, so the transfer fell within section 47(v). The invocation of the doctrine of colourable device was rejected because the sequence of events was treated as genuine and legally effective, and the CBDT circular could not override the statutory position.

Conclusion: The transfer took place on 22-12-1992 and not on 3-1-1992, and the assessee was entitled to the benefit of section 47(v); the capital gain was not taxable.

Ratio Decidendi: For transfer of shares, taxability under capital gains depends on the date on which the sale is legally completed by fulfillment of contractual conditions and delivery of the transfer documents and share certificates, not merely on the date of the agreement to sell.

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