INDRAJIT SINGH Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN pursuance of the order of the High Court dt. 20th Feb., 1990 in MCC No. 93/1985 on the application of the assessee under S. 256(2) of the IT Act, 1961, the Tribunal, Indore, has forwarded the statement of the case and referred the following questions of law for the opinion of this Court :

(2.) THE assessee was assessed in the status of individual for the asst. year 1968 -69, previous year ending Diwali of 1967. The assessee sold grain weighing 490.5 mani for Rs. 60,857. According to the assessee, the grain was agricultural produce of the joint family which he had received in the asst. year 1967 -68 on partial partition of the HUF known as M/s Rai Seth Achal Singh Bhanwar Singh, and, therefore, it was exempt from tax under S. 10 of the Act. The assessee also contended that conversion of grain into cash was not liable to be taxed at a difference between the sale price and the cost price but only between the sale price and market price which the assessee had shown as nil. The assessee claimed that it was not carrying on any business in grain or grain lending. The ITO did not accept the claim of the assessee and observed that after partition of HUF, the character of the grain in the hands of the assessee was capital and not an agricultural produce and, therefore, the income derived therefrom, was not an agricultural income. The ITO recorded a finding that the same constituted an adventure in the nature of trade and took the cost price of grain at the rate of Rs. 55 per mani as valued at the time of partition and deducted the same from the sale price and computed the profit at Rs. 33,880.

(3.) THE assessee filed an appeal before the AAC who by order dt. 16th Feb., 1982 endorsed the order of the ITO. Second appeal filed by the assessee before the Tribunal also failed. The assessee filed an application before the Tribunal for reference of the questions of law, arising out of the order of the Tribunal but the application was dismissed. The assessee, therefore, filed application under S. 256(2) of the IT Act before this Court and in pursuance of the order dt. 20th Feb., 1990 passed by this Court, the said questions have been referred.