1985 (9) TMI 115 - AT - Income Tax

Summary

Issues:
1. Whether the assessee is liable to pay capital gains on the transfer of a flat in a co-operative housing society.
2. Whether the transfer of ownership of the flat was complete and effective for tax purposes.
3. Whether the society's refusal to recognize the purchaser as a member affects the transfer of ownership.
4. Whether the sale deed registration is necessary for the transfer of a flat in a co-operative society.

Analysis:
1. The assessee appealed against the order of the Commissioner (Appeals) holding him liable for capital gains on the transfer of a flat in a co-operative housing society. The agreement for the sale was made, and consideration received, but the society had not accepted the transferee's membership application. The Income Tax Officer (ITO) considered the transfer complete as the assessee relinquished his rights in the flat. The Commissioner (Appeals) also upheld this view, citing relevant provisions of the Income-tax Act, 1961.
2. The Commissioner (Appeals) noted that the transferee was a tenant using the flat for non-residential purposes and that the society had not recognized the transferee as a member. The assessee argued that ownership transfer was incomplete until society recognition. However, the Commissioner (Appeals) held that the assessee had fulfilled all requirements for an effective transfer, including relinquishing all rights over the property.
3. The Tribunal reviewed the Maharashtra Co-operative Societies Act, which required society permission for property transfers. Referring to a Supreme Court decision, the Tribunal concluded that the right to occupy a flat was independent of shareholding and transferable without society consent. The Tribunal found that the assessee had completed all necessary steps for an effective transfer, and the refusal of society recognition did not invalidate the sale.
4. The Tribunal determined that the transfer was complete under section 2(47) of the Income-tax Act, as the assessee sold his right, title, and interest in the property and relinquished the asset to the purchaser. The Tribunal held that the sale was not prohibited by law, and the absence of a registered deed did not affect the transfer's validity. Consequently, the Tribunal dismissed the appeal, affirming the assessee's liability for capital gains tax.