JAYKRISHNA HARIVALLABHDAS HUF Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) AT the instance of the applicant assessee, the following two questions are referred for our opinion by the Tribunal, Ahmedabad Bench. The referred questions are as under :

(2.) IT will be profitable to have a look at the introductory facts. The assessee is a HUF. The main source of income was dividend. The assessee was not doing the money lending business. The relevant assessment year with which we are concerned is 1976 77. The assessee had received on partition (final) plot No. 6A sub plot No. 3 of Dariapur Kazipur. Its area was 5082 sq. yards. Out of this land, it was claimed by the assessee that area measuring 4273 sq. yards was converted into stock in trade of the business of the land and the assessee revalued the same at Rs. 3,84,570.00 w.e.f. 1st June, 1975 as against cost of Rs. 1,27,335.00. The HUF consisted of Shri Jaykrishna Harivallabhdas (Karta), his wife and the branch of Shri Rajesh Jaykrishna, son of Shri Jaykrishna Harivallabhdas. The assessee further claimed that with the said stock in trade, he joined the firm of M/s Narmata Investors as a partner and his capital amount was credited with Rs. 3,84,570.00. It was further claimed that the difference of Rs. 2,57,235.00 is neither taxable as income nor as capital gain within the meaning of S. 45 of the IT Act, 1961 (for short "the Act of 1961'').

(3.) THE Revenue carried the matter before the Tribunal. The Tribunal agreeing with the Revenue took view that there was no conversion of the capital asset into stock in trade from 1st June, 1975. The Tribunal further held that till 16th June, 1975, the land in question remained capital asset of the family of which the assessee was the Karta. The Tribunal further held that the decision of CIT vs. Hind Construction Co. Ltd. 1974 CTR (SC) 157 : (1972) 83 ITR 211 (SC) relied upon by the assessee was not applicable on the facts of the present case. Accordingly, the Tribunal set aside the findings of the learned Commissioner (A). As noted earlier, said decision of the Tribunal had given rise to the referred questions at the instance of the assessee. At the time of final hearing of this reference, Mr. Kaji, learned counsel to the assessee, contended that the question No. 2 may be considered first as in his view, it is covered in favour of the assessee by the decision of the Supreme Court in the case of Sunil Siddharthbhai vs. CIT and Kartikeya V. Sarabhai vs. CIT (1985) 49 CTR (SC) 172 : (1985) 156 ITR 509 (SC), and if the question No. 2 is answered in favour of the assessee, then there would remain no occasion for him to press question No. 1 and it need not be answered. In view of the aforesaid stand taken by the assessee, we deem it fit in the present case to consider question No. 2 first.