Legal transfer of immovable property governs capital gains treatment when no conveyance or part performance is shown.

Capital gains could not be denied on the basis of an alleged transfer of immovable property to an association of persons unless the transfer was legally effective under property law. Although a transaction may amount to a transfer under Section 2(47) of the Income-tax Act, 1961, immovable property still requires a valid conveyance or a qualifying arrangement of part performance with possession under Section 53-A of the Transfer of Property Act. As neither a conveyance nor such part performance was shown, the alleged transfer was not established on the materials, and assessment of capital gains in the appellant's hands was upheld.

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Issues: Whether capital gains could be assessed in the hands of the appellant on the footing that the immovable property had been transferred to the association of persons.

Analysis: For income-tax purposes, a transfer may fall within Section 2(47) of the Income-tax Act, 1961, but where the subject-matter is immovable property, the transfer must satisfy the requirements of the general law governing conveyance and registration. In the absence of a conveyance, and in the absence of any agreement accompanied by part performance and possession as contemplated by Section 53-A of the Transfer of Property Act, the alleged transfer to the association of persons could not be accepted. The finding that the property had already stood transferred to the association of persons was therefore not made out on the materials.

Conclusion: The issue was decided against the appellant and in favour of the Revenue.

Final Conclusion: The assessment of capital gains in the appellant's hands was upheld and the appeal was dismissed.

Ratio Decidendi: An alleged transfer of immovable property for capital gains purposes must be supported by a legally effective transfer in law, and where neither conveyance nor a qualifying case of part performance is shown, the transfer cannot be treated as complete under Section 2(47) of the Income-tax Act, 1961.

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