Transfer of immovable property by way of sale is not complete upon registration of the sale deed alone. The intention of the parties is the true test to determine whether there has been an effective transfer.

G.C.Bharuka, J.

1. This reference made under Sec. 256(1) of the Income-tax Act, 1961 (hereinafter to be referred to as "the Act" only), involves the following questions of law :

" (1) Whether, on the facts and in the circumstances of the case, the learned Income-tax Officer was justified in including the sum of Rs. 42,000 pertaining to three deeds of sale in the gross receipts for the purposes of computation of capital gains ?

(2) Whether, on the facts and in the circumstances of the case, the learned Income-tax Officer was legally correct in coming to a finding that once the sale deed was registered, the transfer was complete and any stipulation in the deed of sale to the contrary was irrelevant ?

(3) Whether by mere execution of a deed of sale and registration thereof, there could be transfer of an immovable property without effective conveyance of the same to the transferee ?

(4) Whether, transfer according to Sec. 2(47) of the Income-tax Act, 1961, must mean effective conveyance of the capital asset to the transferee ?"

2. The relevant facts and circumstances of the case lie in a short corn-pass.

The assessee is an individual. During the previous year relating to the assessment year 1977-78, he sold 49 kathas and 91/2 dhoors of land through different registered sale deeds for a total consideration of Rs. 1,93,050. Out of these sales, three sales were of Rs. 14,000 each. The registered sale deeds in respect of these sales clearly stipulated that only on payment of the entire consideration amount, the registration receipt and delivery of possession will be given evidencing the passing of title to the vendee. It is not in dispute that, during the period under consideration, the entire consideration amount was not paid. Still the Income-tax Officer included Rs. 42,000 representing the consideration amount of the said three sale deeds for the purpose of computing capital gains on the ground that, since the sale deeds have been registered, therefore, there is an implied transfer. On appeal to the Appellate Assistant Commissioner, the contention of the assessee was accepted in respect of only two sale deeds since in respect of the third sale deed, the Appellate Assistant Commissioner found some ambiguity in its recitals. Against the said appellate order, both the Department as well as the assessee filed appeals before the Tribunal. The Tribunal took the view that since the transaction is evidenced by registered sale deeds, therefore, irrespective of any stipulation for payment and delivery of possession at a future date or the intention of the parties in respect of passing of title, for the purpose of the Income-tax Act, it will be deemed to be a transfer.

3. After hearing learned counsel for the parties, I have no hesitation in holding that the properties do not necessarily pass as soon as the instrument is registered, for the true test is the intention of the parties. Registration is prima facie proof of an intention to transfer, but it is no proof of an operative transfer if there is a condition precedent as to the payment of consideration or delivery of the deed. Thus the seller may retain the deed pending payment of price and, in that case, there is no transfer until the price is paid and the deed is delivered.

4. To substantiate my above view, I may first refer to a Bench decision of the Calcutta High Court in the case of Nitai Chandra Naskar V/s. Smt. Champahlnta Debi reported in [1919] 29 CLJ 250, wherein while referring to Sec. 54 of the Transfer of Property Act, it has been held that, "sale is a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised. The true test is, what is the intention of the parties to the transaction. If the intention is that title should pass immediately, even though the consideration has not been paid, title passes, that is, failure to pay the consideration for a conveyance does not defeat the conveyance except where there is an agreement that it sh