Transfer of immovable property to a partnership firm may be taxable when exclusive ownership becomes shared rights and the arrangement is questioned.

Contribution of a partner's personal immovable property to a partnership firm can amount to a transfer of a capital asset because the contributor's exclusive ownership is converted into shared rights. The transaction must be examined on its real nature, and where the Revenue alleges a sham or colourable device to avoid tax, the Tribunal must record findings on genuineness and the true character of the arrangement. The text also notes that registration requirements under the Registration Act, 1908 may arise where contribution of immovable property extinguishes or limits proprietary rights. The transfer issue was answered in favour of the Revenue, and the matter was remanded for fresh adjudication on the unanswered issues.

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Issues: Whether the transfer of immovable property by a partner to a partnership firm as capital contribution was a taxable transfer and whether the transaction disclosed a colourable device or sham arrangement warranting fresh examination.

Analysis: The land was held to have ceased to be held under a valid lease after expiry of the lease term, and the assessee acquired valid title only on execution of the freehold deed. The Court held that contribution of personal property to a partnership firm reduces the contributor's exclusive interest into a shared interest and can amount to a transfer of a capital asset. It further held that such a transaction must be examined on its real nature, and where the Revenue alleges that the partnership arrangement is merely a device to avoid tax, the Tribunal must record findings on genuineness and the true character of the transaction. The Court also indicated that the requirement of registration under the Registration Act, 1908 may arise where immovable property itself is contributed in a manner that extinguishes or limits proprietary rights.

Conclusion: The transfer issue was answered in favour of the Revenue, and the matter was remanded because the Tribunal had not examined the allegation of sham transaction and colourable device.

Final Conclusion: The appeal succeeded, the Tribunal's order was set aside, and the matter was sent back for fresh adjudication on the unanswered issues.

Ratio Decidendi: Contribution of a partner's personal immovable property to a firm, where exclusive ownership is reduced to shared rights, constitutes a transfer for capital gains purposes, and the tax authority may pierce a partnership arrangement if it is alleged to be a device to evade tax.

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