Taxable transfer of co-operative society flat confirmed where ownership rights were fully divested despite non-recognition of the purchaser.

Capital gains were held chargeable on the transfer of a flat in a co-operative housing society where the transferor had received full consideration, executed the transfer documents, handed over possession, and relinquished all rights in the flat and related shares. The transfer was treated as complete under section 2(47) of the Income-tax Act, 1961, because sale, relinquishment, and extinguishment of rights had occurred. Prior society approval or registration of a conveyance deed was not necessary for the transfer to be effective between the parties, and the society's refusal to admit the purchaser as a member did not undo the completed transfer.

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Issues: Whether capital gains were chargeable on the transfer of a flat in a co-operative housing society when the society had not recognised the transferee as a member.

Analysis: The transfer was examined under section 2(47) of the Income-tax Act, 1961, which treats sale, relinquishment, and extinguishment of rights as transfer. The assessee had received the full consideration, executed the transfer documents, handed over possession, and relinquished all right, title, and interest in the flat and related shares. The Court also relied on the Maharashtra Co-operative Societies Act, 1960 and the Rules to hold that prior society approval or registration of a conveyance deed was not necessary for the transfer to be effective as between the transferor and transferee. The refusal of the society to admit the purchaser as a member did not undo the completed transfer by the assessee.

Conclusion: Capital gains were rightly brought to tax because the transfer was complete and effective in the assessee's hands notwithstanding non-recognition of the transferee by the society.

Ratio Decidendi: Where the transferor has divested himself of all rights in a capital asset and has completed the acts necessary to effectuate the transfer, the transaction constitutes a taxable transfer under section 2(47) even if the co-operative society has not yet recognised the transferee as a member.

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