TaxTMI Login
Just a moment...
Press 'Enter' to add multiple search terms. Rules for Better Search
Use comma for multiple locations.
---------------- For section wise search only -----------------
Accuracy Level ~ 90%
of 
Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
All Case Laws
of Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
All Case Laws
Join Channel
Note
Bookmark
Share
Don't have an account? Register Here
of Press 'Enter' after typing page number.
Issues: (i) Whether the firm's book entries transferring the immovable property to a partner, without a registered conveyance and during the subsistence of the firm, constituted a transfer of a capital asset. (ii) Whether capital gains tax was chargeable on the firm under the Income-tax Act, 1961.
Issue (i): Whether the firm's book entries transferring the immovable property to a partner, without a registered conveyance and during the subsistence of the firm, constituted a transfer of a capital asset.
Analysis: The property had been brought into the common stock of the partnership, so the firm could be treated as having ownership for partnership purposes. However, rights in immovable property are not created or extinguished by mere adjustment entries in the books. A valid transfer of such property requires compliance with the formalities of law, including a registered deed of conveyance where applicable. The transfer here was not in the course of dissolution or retirement, and therefore could not be equated with a distribution of assets on dissolution.
Conclusion: The book entries did not effect a legal transfer of the immovable property, and the firm's release of the property in favour of the partner was ineffective in law.
Issue (ii): Whether capital gains tax was chargeable on the firm under the Income-tax Act, 1961.
Analysis: Capital gains tax under section 45 depends on a transfer within the meaning of section 2(47). Since no legally effective transfer took place through the book entries, the essential condition for attracting section 45 was absent. The exception for distribution on dissolution was also inapplicable on the facts. Accordingly, the alleged transfer did not result in taxable capital gains.
Conclusion: No capital gains tax was chargeable on the firm.
Final Conclusion: The reference was answered substantially in favour of the assessee: the impugned book entries did not bring about a transfer exigible to capital gains tax.
Ratio Decidendi: Mere book entries do not effect a transfer of immovable property or extinguish rights therein; absent a legally effective conveyance, and outside dissolution-based distribution, such entries do not constitute a transfer attracting capital gains tax.
TaxTMI 
