GANGADHAR BABULAL Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS income-tax reference had came to this court on a requisition on application under section 66(2) of the Act. The questions which have been referred for the opinion of the court are :

(2.) THE material facts are : that the assessee in this case, namely, Messrs. Gangadhar Babulal was assessed to income-tax in the status of an individual for the assessment year 1946-47. THE previous year corresponding to this assessment year is October 16, 1944, to November 6, 1945. Prior to the previous year on June 7, 1943, the assessee who had been up to that time the member of a Hindu undivided family became separated upon partial partition of the family. According to the findings in the statement of the case the family was carrying on a money-lending business as well as a business in the purchase and sale of silver. This latter business was carried on since 1936. On partition the assessee in his case got the money-lending business as well as the stock of silver valued at Rs. 27,710. This was the closing stock of the silver in the silver account of the family prior to the date of partition. It is common ground that the stock of silver was valued during all the years since 1936 at cost price and not at market price. In this reference we are not concerned with the money-lending business but only with silver. On receipt of the silver by the assessee he debited it in the silver account in the following manner :

(3.) THE question which then arises is whether on partition as a result of which the assessee got the stock of silver, the silver which constituted the became capital in his hands. It has been noticed that so far as the assessee himself is concerned he did not treat the stock of silver which he got in any way differently from the manner in which the stock of silver of silver used to be dealt with by the family. It might have been open to the assessee to have shown the stock of silver received by it as a capital asset by making appropriate entries in respect of the value of the silver received by him.