Legal ownership of immovable property controls capital gains tax, and accounting entries alone cannot transfer title to a firm.

Long-term capital gains from the sale of land were held not assessable in the hands of the firm because legal title remained with the partner. The purchase deed stood in the partner's personal name, the sale deed was executed by him individually, and no registered conveyance transferred the property to the firm. Book entries and balance-sheet reflection could not alter ownership of immovable property or vest title in the firm. On that basis, the addition was deleted and the firm's appeal succeeded.

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Issues: Whether long-term capital gains from the sale of land could be taxed in the hands of the assessee-firm, where the purchase deed stood in the name of a partner and the property was reflected in the firm's books and balance-sheet.

Analysis: The decisive factor was legal ownership of the immovable property. The purchase deed was registered in the personal name of the partner, the sale deed was also executed by him in his individual capacity, and there was no registered conveyance transferring the property to the firm. Entries in the books of account and balance-sheet could not by themselves alter title to immovable property. In the absence of a registered instrument of conveyance, the property could not be treated as belonging to the firm, and the reasoning in the cited High Court decisions supported that conclusion.

Conclusion: The long-term capital gains were not assessable in the hands of the assessee-firm, and the addition was rightly deleted in the firm's appeal.

Ratio Decidendi: Ownership of immovable property cannot be transferred or attributed on the basis of accounting entries alone; a registered conveyance is necessary to vest title in the transferee.

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