Capital gains under transfer rules arise only when title passes by sale or effective conveyance, not by agreement alone.

Section 12B of the Income-tax Act, 1922 applied only when title to a capital asset passed by sale or effective transfer within the relevant period. A mere agreement to sell did not constitute a transfer, and immovable property could not pass by delivery of possession alone; a registered conveyance was required. Entries in the account books did not determine the transfer date. Stock was outside the definition of capital asset, while furniture, as movable property capable of transfer by delivery, stood on a different footing. On these facts, goodwill and the immovable assets were not transferred before 1 April 1948, so the receipt was not wholly taxable as capital gains for 1948-49.

---

---

Issues: Whether, on the facts, the assessee's receipt was assessable as capital gains under section 12B of the Income-tax Act, 1922 for the assessment year 1948-49, and whether the relevant assets had been sold or transferred before 1 April 1948.

Analysis: Section 12B taxed profits or gains arising from the sale, exchange or transfer of a capital asset effected within the specified period, and the decisive date was the date on which title passed by sale or effective transfer. The agreement in question was only an agreement to sell until adopted by the company, and in any event the immovable assets could not pass by mere delivery of possession; a registered conveyance was necessary for title to pass. Entries in the account books did not determine the date of transfer. The stock was outside the definition of capital asset. Furniture, being movable property capable of passing by delivery, could be treated differently, but the goodwill and the immovable assets had not been transferred before 1 April 1948.

Conclusion: The sum of Rs. 79,494 was not wholly assessable as capital gains in the assessment year 1948-49. Only such part, if any, as was attributable to capital gain on the transfer of furniture valued at Rs. 18,805 could be brought to tax.

Final Conclusion: The appeal succeeded substantially because the impugned addition was unsustainable in full, though a limited taxability was left open in respect of furniture.

Ratio Decidendi: For section 12B, capital gains arise only when title to the capital asset passes by sale or by an effective transfer, and neither mere agreement to sell nor delivery of possession of immovable property, without conveyance, is sufficient to constitute such transfer.

---