SEVANTILAL MANEKLAL SHETH Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE assessee is one Maneklal Sheth, who having died on 22nd April, 1959, has been represented in the present assessment proceedings, which relate to the asst. yrs. 1957 -58, 1958 -59 and 1959 -60, by his son, the present applicant before us. In the year 1951, the assessee Maneklal had made a gift of 1,184 ordinary and 155 preference shares of Changdeo Sugar Mills Ltd., to his wife, Bai Laxmibai. The total value of these transfered shares on the date of the transfer was Rs. 69,730. Subsequent to the transfer of these shares by Maneklal to his wife, the preference shares were converted by the company into ordinary shares giving the shareholders 8 ordinary shares for one preference share, with the result that by the end of the year 1954 Bai Laxmibai possessed 2,424 ordinary shares of the mills. On the 1st Aug., 1956, Bai Laxmibai sold 2,400 out of the said shares possessed by her for a total price of Rs. 1,54,800 resulting in a capital gain of Rs. 70,860 as computed under S. 12B of the IT Act.

(2.) IT will be seen that the first question arises out of the assessment order for the asst. year 1957 - 58; the second relates to the assessment order for the asst. year 1958 -59 and the last two questions are concerned with the assessment order for the asst. year 1959 -60. It will also be seen that question No. 2 and question No. 4 are the same, with the only difference that question No. 2 is for the asst. year 1958 -59, while question No. 4 is for the subsequent assessment year. Question No. 3, which is one of the question relating to the assessment order for the year 1959 -60, has not been pressed by Mr. Mehta learned counsel for the assessee. The conclusion of the Tribunal so far as that question is concerned is accepted as correct by Mr. Mehta and he has advanced no arguments challenging that conclusion. That question, therefore, will be answered in the affirmative.

(3.) THE argument of Mr. Mehta, learned counsel for the assessee, is that what comes within the ambit of S. 16(3)(a)(iii) is the income from the transferred assets, which is different from the profit or gain arising from the sale of the transferred assets, or, in other words, the "capital gains" from the transferred assets. "Income" as defined in S. 2(6C) of the IT Act includes "capital gains" chargeable under S. 12B, and "capital gains 'chargeable under S. 12B are profits or gains arising from the sale, exchange, relinquishment or transfer of a capital asset effected after the 31st March, 1956. This kind of income, however, is not the income from property such as is contemplated under the IT Act, because income from property under the Indian IT Act is income which comes under the specific head mentioned in S. 6 and is computable under S. 9 of the Indian IT Act. Capital gains though it constitutes income under the inclusive definition of the word is "income", income under a distinctly different head from the income coming under the head "income from property". The language used in S. 16(3)(a)(iii) has reference to the income which comes under the head "income from property" and not to income, which comes under the head "capital gains".