COMMISSIONER OF INCOME TAX CALCUTTA GILLANDERS ARBUTHNOT AND GO Vs. GILLANDERS ARBUTHNOT AND GO:THE COMMISSIONER OF INCOME TAX CALCUTTA

JUDGEMENT

(1.) These are cross-appeals by certificate. They arise from the decision of the Calcutta High Court in a Reference under Section 66 (1) of the Indian Income-tax Act, 1922 (to be hereinafter referred to as the Act). At the instance of the assessee as well as the Commissioner, the Income-tax Tribunal 'B' Bench, Calcutta stated a case and submitted as many as five questions to the High Court for obtaining its opinion. Some of the questions referred to the High Court have not been pressed before this Court. Therefore we shall not refer to them. The questions that were pressed before us are :

(2.) The High Court answered the first question in the affirmative and in favour of the Revenue. So far as the second question is concerned, it split the same into two questions viz. whther on the facts and in the circumstances of the case any capital gains within the meaning of Section 12-B could be said to arise by the transaction involving transfer of investments held by the assessee to the Company and whether on the facts and in the circumstances of the case any capital gains within the meaning of Section 12-B could be said to arise by the admission of the Company as a partner in the assessee firm and issue of shares of the Company to the public It answered the first part of the question in the affirmative and in favour of the Revenue and the second part in the negative and against the Revenue. As regards the 3rd question, the High Court opined that on the facts and in the circumstances of the case the capital gains should have been computed at Rs. 27,04,772/-. Aggrieved by this decision the Commissioner of Income-tax has brought Civil Appeal No. 1452 of 1969 and the assessee has brought Civil Appeal No. 1502 of 1969.

(3.) The only contentions urged in the assessee's appeal were that on the facts and in the circumstances of the case proceedings under Section 34 (1) (a) have not been validly initiated and to the facts of this case Section 12-B is not attracted. In the appeal by the Commissioner, the question for decision is what is the correct amount that has to be brought to tax under Section 12-B as capital gains. The Counsel for the Revenue did not contest the conclusion of the High Court that on the facts and in the circumstances of the case, no capital gains within the meaning of Section 12-B could be said to have arisen by the admission of the Company as a partner of the assessee company and issue of shares of the Company to the Public. Hence all that we have to decide in these cases is (1) whether the proceedings initiated under Section 34 (1) (a) are valid, (2) Whether Section 12-B is attracted to the facts of the case and (3). If Section 12-B is attracted what is the amount of the capital gains made