NAYANTARA G AGRAWAL Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) BY this reference under section 256(1) of the Income -tax Act, 1961, made at the instance of the assessee, the Income -tax Appellate Tribunal has referred the following questions to this court for opinion.

(2.) THE facts of this case, relevant for the determination of the controversy before us, briefly stated, are as under : The assessee is an 'individual'. She is the wife of Sri G. N. Agarwal, who was the karta of his Hindu undivided family. Certain land was gifted to her by her husband, Sri G. N. Agarwal, by a gift deed dated March 21, 1963. This gift was made by Sri G. N. Agarwal in his capacity as a karta of the Hindu undivided family 'Messrs. G. N. Agarwal'. The validity of the above gift was challenged by the Revenue. The matter went up to the High Court. The High Court held the gift to be invalid. There was, however, a partial partition of the Hindu undivided family later and the property in question came to be allotted to the assessee. The land was held by the assessee as an owner since then. On March 13, 1972, the assessee made an affidavit stating therein that she had started the business of dealing in purchase and sale of land and real estate and has converted the land in question into stock -in -trade of that business and the value of the same for that purpose was Rs. 10 lakhs. There is nothing more on record except the above affidavit to indicate that the assessee, in fact, carried on any business of dealing in lands or real estate. On January 1, 1973, the assessee entered into a partnership with a company, Messrs. Agrawal Minerals (Goa) Pvt. Ltd., of which the assessee herself was also a director. The said firm was also to carry on the business of sale and purchase of lands. The assessee had a 50 per cent. share in the said firm and other 50 per cent. share belonged to the limited company. In terms of the deed of partnership, the assessee brought in the said land as her share of capital contribution in the partnership firm which was valued at Rs. 10,00,000. At that time, the other party did not bring in any capital but it was agreed that it might contribute capital as and when required. Such an occasion, however, did not arise. Though the above firm was to carry on the business of sale and purchase of land, no dealings inland were conducted by the said firm. On the other hand, within three months of its formation, on March 28, 1973, the assessee expressed her desire not to continue as a partner and accordingly, she retired and the firm was dissolved. The assets were shared. The land was retained by the limited company and the assessee got shares worth 10 lakhs of rupees. The Income -tax Officer held that there was no genuine partnership and the transaction was sham and the assessee had received the value of her land. The income -tax Officer, therefore, held it to be a transaction of transfer of land which would be subject to capital gains tax under section 45 of the Income -tax Act, 1961, and worked out the capital gains accordingly.

(3.) MR . Pardiwalla, learned counsel for the assessee, submits that the findings of the Tribunal are not based on facts and, as such, not tenable. We have carefully considered the submission. However, in view of the clear facts of the case set out above, we find it difficult to accept the same. The Tribunal has considered the conduct of the assessee and the entire transaction and the deed which is evident from the following facts set out in its order :