PAILY PILLAI P M Vs. STATE OF KERALA

JUDGEMENT

(1.) THREE questions of law extracted below have been referred to this court by the Kerala Agrl. I.T. Appellate Tribunal, Trivandrum (hereinafter called "the Tribunal"), under Section 60(1) of the Kerala Agrl. I.T. Act (for short "the Act") as arising out of the common order passed by it in three connected appeals--AITA Nos. 218 to 220 of 1975--relating to the assessment of agricultural income-tax made against the respondent-assessee for the years 1970-71, 1971-72 and 1972-73 :

(2.) WHETHER, on the facts and in the circumstances of the case, the Tribunal is justified in holding that difference in price obtained by the applicant from the sale of the estate in the name of the minor at Nilambur is not an accretion and that the income from the estate subsequently purchased at Vellayur village with the consideration of the sale of the minor's estate at Nilambur is the income assessable at the hands of the applicant under Section 9(2) of the Agrl. Income-tax Act ?

(3.) ON the further question as to whether the husband was liable to be assessed in respect of the income derived by way of interest from the investment of the sale proceeds, the High Court based its conclusion on the fact that the department while making the assessment for the year 1957-58 had chosen to regard the sale proceeds which the wife realised by the sale of the shares as having resulted in her getting back the original value of the shares amounting to Rs. 69,730 as well as an additional gain over that value to the extent of Rs. 70,860, thereby treating the surplus of Rs. 70,860 as income arising from assets transferred. Since the said assessment had become final, the High Court took the view that for the subsequent years it was not open to the department to treat the entirety of the sale consideration of Rs. 1,54,800 received by the wife as representing the asset transferred to her by the husband, and assess the income derived by way of interest realised by the investment of her income in the hands of the husband under Section 16(3)(a)(iii). In this view the High Court held that out of the interest reeeived by the wife for the subsequent years commencing from 1958-59 only such portion thereof as would be attributable to the value of the transferred assets, namely, Rs. 69,730, was total income of the husband and not the rest. Against the aforesaid decision of the Bombay High Court the assessee filed an appeal before the Supreme Court challenging the adverse finding entered against him by the High Court on the first point relating to the includibility of capital gains in his total income under Section 16(3)(a)(iii). The department did not file any appeal against the decision of the High Court on the question of the assessability of the interest income under Section 16(3)(a)(iii). Hence, the Supreme Court did not have any occasion to examine the correctness or otherwise of the view taken by the Bombay High Court on the second aspect aforementioned. The appeal filed by the assessee was dismissed by the Supreme Court as per the judgment in Seventilal Manehlal Sheth v. CIT [1968] 68 ITR 503. The following passage occurring at page 507 of that report is of particular assistance in the present context :