SHIV SHANKER LAL Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) Shri Amba Prasad, his son Shri Shiv Shanker Lal, and his grand-son, Shri Bhawani Shanker. constituted a Hindu undivided family. This family owned a property called Amba Prasad Garden situated at Subzimandi, of the extent of 14,716 sq. yards and coataining a garden house which covered an area of 312 sq. yards. Amba Prasad died in 1950 and in 1953, the joint family was disrupted by a partition between Shri Shiv Shanker Lal, his wife, Smt. Krishana Devi, and his son, Shri Bhawani Shanker. Under this partition, the property known as Amba Prasad Garden was allotted to the share of Shri Shiv Shanker Lal (who will be hereinafter referred to as the assessee). On 25-6-1961 the assessee, his wife, his son and his daughter-in-law formed a company known as New Delhi Theatres Private Limited. The assessee, his wife and his son held 10 shares each and the assessee's daughter-in-law held 5 shares in this company. On 15-7-1961, the assessee sold 6,120 sq. yards of land out of Amba Prasad Garden along with the garden house situated therein to the company for Rs. 93.450.00. On 25-8-1961, the assessee sold 5,678 sq. yards from out of the remaining portion of the land to M/s. Ganesh Flour Mills Company Ltd., at the rate of Rs. 60.00 per sq. yard. In the income-tax return filed by the assessee for the assessment year 1962-63, the relevant previous year being the year ending 14-7-1961, the assessee declared a net income of Rs. 21,270.00 and a capital loss of Rs. 54,060.00. In computing this loss, the assessee had deducted Rs. 93,440.00, the amount for which the property was sold to the company, from Rs. 1,50,000.00 which, according to the wealth-tax return of the assessee was the value of the property. Although the assessee had claimed a capital loss in respect of the sale of this property to the company implying thereby that the property was a capital asset, during the course of the assessment proceeding he claimed that this was not a capital asset within the meaning of section 2(14) of the Income-tax Act, 1961 (hereinafter referred to as the Act) as it was in the nature of agricultural land. The Income-tax Officer did not accept the assessee's claim that it was an agricultural land and held that it was a capital asset. The Income-tax Officer was also of the view that the transaction in question came within the scope of section 52 of the Act and, therefore, estimating the market value of the property at Rs. 80.00 per sq. yards, he held that the assessee had derived capital gains of Rs. 4,74,956.00. He included this amount in the income-tax return of the assessee and completed the assessment on a total income of Rs. 5,04,104.00.

(2.) The assessee preferred an appeal before the Appellate Assistant Commissioner only in respect of the capital gains assessed by the Income-tax Officer. The Appellate Assistant Commissioner, however, confirmed the order of the Income-tax Officer except for a modification in the amount of the capital gains. He reduced the amount of capital gains to Rs. 3,80,664.00.

(3.) The assessee preferred a further appeal before the Income-tax Appellate Tribunal (hereinafter referred to as the Tribunal) and raised three contentions, namely,-