COMMISSIONER OF INCOME TAX Vs. P P THOMAS

JUDGEMENT

(1.) The question referred to us for decision in this Tax Reference Case is as follows:

(2.) The applicant before us is the Commissioner of Income tax, Trivandrum and the respondent is the assessee. The assessee is an individual who surrendered 148 shares held by him in M/s. Cavunal Rubber Estate (P) Ltd. and received land belonging to the company in lieu of such surrender worth Rs.1,46,200/-. The assessing officer took the view that what is received by the assessee would constitute 'dividend' within the meaning of S.2(22)(d) and surrender of 148 shares and receiving the lands thereon would constitute 'transfer' and therefore, would be liable to tax. As against the said decision an appeal was filed before the Commissioner of Income tax (Appeals) who held that surrender of shares was a transfer within the meaning of S.2(47) of the Act and therefore, the surplus resulting from such transaction was liable to be taxed as capital gain. Then the matter went up in second appeal before the Appellate Tribunal. The Tribunal following the decision of the Madras High Court in C.I.T. v. Narasimhan (118 ITR 60) answered the question in favour of the assessee. The Department is aggrieved by the aforesaid decision of the Tribunal.

(3.) Learned Senior Standing Counsel for the Department submitted that the question is now fully covered in favour of the Department in view of the decision of the Supreme Court in Kartikeya V. Sarabhai v. C.I.T. (1997) 228 ITR 163). The Supreme Court affirmed the decision of the Gujarat High Court in Kartikeya V. Sarabhai v. C.I.T. (1982) 138 ITR 425). The Tribunal decided in favour of the assessee placing reliance on the decision of the Madras High Court in C.I.T. v. Narasimhan (118 ITR 60). At the same time the Tribunal noted the contrary view taken by the Gujarat High Court in Kartikeya V. Sarabhai's case (1982) 138 ITR 425). When two views are possible, the view which is in favourable to the assessee is to be adopted in view of the decision of the Supreme Court in C.I.T. v. Kulu Valley Transport Co. Pvt. Ltd. (1970) 77 ITR 518). That was why the Tribunal accepted the view taken by the Madras High Court in Narasimhan's case (118 ITR 60). But this view will be available till the Supreme Court finally pronounces on the question. Now the Supreme Court finally decided the question in Kartikeya V. Sarabhai's case (1997) 228 ITR 163) against the assessee. This Court is therefore, bound to follow the decision of the Supreme Court.