Book entries alone do not transfer partnership immovable property, and capital gains cannot arise without a lawful conveyance.

Mere entries in a partnership firm's books do not by themselves transfer immovable property to the partners, and an internal agreement treating firm assets as individual property is insufficient without a conveyance recognised by law. In the absence of such a legally effective conveyance, ownership of the immovable properties does not pass and there is no transfer of a capital asset within section 2(47) of the Income-tax Act, 1961. On that basis, the deletion of the capital gains addition was upheld.

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Issues: Whether mere entries in the books of a partnership firm, without a deed of conveyance, can amount to a transfer of immovable property from the firm to its partners so as to attract capital gains under the Income-tax Act, 1961.

Analysis: Mere book entries do not convert partnership property into the individual property of partners. An agreement among partners treating firm property as individual property is also insufficient unless it is followed by a conveyance recognised by law. In the absence of such conveyance, there is no transfer of ownership of the immovable properties.

Conclusion: The question was answered in the affirmative. The Tribunal was right in confirming deletion of the capital gains addition, as there was no transfer of a capital asset within the meaning of section 2(47) of the Income-tax Act, 1961.

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