COMMISSIONER OF INCOME TAX Vs. M APPUKUTTY

JUDGEMENT

(1.) This Income Tax Reference is at the instance of the Revenue. The question of law referred to this Court under S.256(1) of the Income Tax Act is as follows:

(2.) One Appukutty was the Managing Partner of a partnership firm, M/s. M. Appukutty. Originally, it was a proprietary concern. It was converted into a partnership only in 1964. Appukutty was a tenant of shop No. 9/866 from 1941. By document No. 2225 of 1960, Appukutty bought the jenmom right of shop 9/866 and the adjacent shop No. 9/865 for consideration of Rs. 10,800/-. The Firm was in possession of building 9/866. By agreement dated 3.7.1986, the possessory right of shop No. 9/866 was transferred by the Firm in favour of one Mohammed Berami and others for a consideration of Rs. 1,00,000/-. By another sale deed executed by Appukutty the right over shop Nos. 9/865 and 9/866 was sold for Rs. 90,000/-.

(3.) In the return of income for the assessment year 1987-88, the Firm did not include Rs. 1,00,000/- received for the transfer of the possessory right of shop No. 9/866 for computation of capital gains on the ground that there was no cost of acquisition for this item of property as it was a self generated asset. But the Assessing Officer rejected this contention and included the amount of Rs. 1,00,000/- for computation of capital gains.