Capital gains on immovable property depend on registered transfer of title, not mere possession or part performance.

For assessment years before the expanded definition of "transfer" in section 2(47) of the Income-tax Act, capital gains on immovable property depend on a legally effective conveyance or registered transfer of title. Mere possession or alleged part performance does not shift the tax incidence where there is no deed of conveyance, no registered transfer, and no material showing valid transfer of ownership. In such circumstances, the transfer is treated as having been made by the person shown by the registered sale deeds to have executed the conveyance, rather than by a party relying only on possession.

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Issues: Whether the capital gains arising from the transfer of the immovable property were assessable in the hands of the assessee-firm or in the hands of the retiring partner.

Analysis: For the assessment year in question, the wider expressions inserted in section 2(47) of the Income-tax Act, 1961 by the Finance Act, 1987 were not yet applicable. On the facts, there was no deed of conveyance, no registered transfer, and no material showing a valid transfer of the property by the firm in favour of the partner. Mere possession or alleged part performance, without a legally effective transfer of title, was insufficient to shift the tax incidence. The registered sale deeds executed by the firm in favour of the purchaser established that the transfer for capital gains purposes was by the firm.

Conclusion: The capital gains were taxable in the hands of the assessee-firm, not in the hands of the partner; the decision below was unsustainable and the Revenue succeeded.

Ratio Decidendi: For assessment years prior to the coming into force of the expanded definitions in section 2(47), capital gains on transfer of immovable property are chargeable to the person who is shown by legally effective conveyance or transfer to have made the transfer, and mere possession or alleged part performance does not substitute for a registered transfer of title.

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