DHIRJLAL GIRDHARIAL Vs. COMMR OF INCOME TAX BOMBAY

JUDGEMENT

(1.) This appeal by special leave is directed against an order of the High Court of Judicature at Bombay, whereby the High Court summarily dismissed an application made under S. 66(2), Indian Income-tax Act, 1922, requiring the Income-tax Appellate Tribunal to state a case and refer to it the question of law said by the appellant to arise out of the order of the Tribunal.

(2.) The appellant is a Hindu undivided family, comprised of Dhirajlal and his two brothers Hiralal and Kirtilal. Dhirajlal being the karta of the family. Girdharlal Trikamlal who was the father of Dhirajlal, Hiralal and Kirtilal, was, the head of the joint Hindu family before his death on 26-7-l945:During his life time he and one of his sons Dhirajlal were also carrying on business separately in their firm name Girdharlal Trikamlal and Co., as dealers in stocks and shares. This firm was dissolved on the death of Girdharlal and a new firm comprised of Dhirajlal and his younger brother Hiralal was formed with the object of taking over the business formerly carried on by M/s. Girdharlal Trikamlal and Co. Girdharlal had an account with the firm of Girdharlal Trikamlal and Co. and on the date of his death this account had a credit balance of Rs. 25,31,999. The firm Girdhar Lal Trikamlal and Co. at that moment had shares of the value of Rs. 23,60,000 approximately as part of their total assets. On the death of Girdharlal, his three sons and his widow clearly became entitled to the amount that stood to his credit in the firm Girdharlal Trikamlal and Co. and by an arrangement made after his death the Hindu undivided family got in July 1942 shares of the value of Rs. 18,34,586 from the firm towards payment of its liability to the Hindu undivided family as part of the inheritance of Girdharlal and for the balance the Hindu undivided family was shown as creditor of the new firm. The shares that were handed over were valued at the market price. The Hindu undivided family thus in its status as such became the owner of those shares. It is common ground that the family in that status antecedent to that date was not doing any business in stocks or shares.

(3.) The Hindu undivided family having obtained the shares, it sold some of the shares in the financial year 1943-44 and made a profit of Rs. 1,42,025 in the assessment year 1944-45. The Income-tax Officer during that year included the profit made by sale of shares in the assessment of the Hindu undivided family by arriving at the following finding: