COMMISSIONER OF INCOME TAX Vs. MAMTA NAROTTAMDAS

JUDGEMENT

(1.) THE Tribunal (hereinafter referred to as " the Tribunal ") has referred to us for our opinion the following questions under S. 256(1) of the IT Act, 1961 (hereinafter referred to as " the Act "):

(2.) THE facts leading to this reference are as follows. The assessee is an individual. The assessment year under reference is 1971 72, the previous year being Samvat year 2026, which ended on October 30, 1970. The assessee purchased jointly with her mother and sister, land admeasuring 9 acres 32 gunthas bearing Survey No. 164, situated at village Muthia, near National Highway and estate of Gujarat Industrial Development Corporation at Naroda, for Rs. 65,000 on March 2, 1970. The assessee's share in the land was 9/20 and she contributed Rs. 29,250 as her share in the purchase price. On May 1, 1970, the assessee became a partner in a partnership firm in the name and style of Mamta Pratiksha Corporation and contributed her aforesaid 9/20 share in the land as her share in the capital of the firm. The assessee's share in the capital was valued at Rs. 96,050 in the books of the firm. The ITO, in the course of assessment proceedings for the asst. year 1971 72, held that the assessee's contribution to the capital of the firm was only a share transaction and, as such, it did not give rise to a transfer of a capital asset. The ITO completed the assessment on a total income of Rs. 38,549 as against returned income of Rs. 32,505.

(3.) BEING aggrieved by the order passed by the CIT, the assessee carried the matter in appeal before the Tribunal. The Tribunal held that the notification dt. February 6, 1973 (see (1973) 89 ITR (St.) 145) on which reliance was placed by the CIT did not have retrospective effect from any date prior to May 2, 1970. It further held that contribution by the assessee of her share in the capital of the partnership firm amounted to transfer within the meaning of S. 2(47) of the Act, but since no consideration flowed from the partnership firm to the assessee for such transfer on May 1, 1970, there was no scope of any surplus under the head "Capital gains ". It was further held by the Tribunal that the amount of Rs. 66,800 reflecting difference between the purchase price of Rs. 29,250 and the valuation in the firm's books at Rs. 96,050 was not assessable as " Profits and gains of business " or under the head " Income from other sources " as held by the CIT. In the result, the Tribunal allowed the assessee's appeal and set aside the order of the CIT.