COMMISSIONER OF INCOME TAX Vs. SHYAM NARAIN MEHROTRA

JUDGEMENT

(1.) In this reference, we are concerned with the assessment year 1962-63 relevant to the financial year 1961-62. The assessee is an individual. During the relevant year, he sold 1,150 shares of Bharat Woollen Mills Ltd. to his brother, Sri P. N. Mehrotra, at the rate of Rs. 10 per share, for a sum of Rs. 11,500. The break-up value of those shares, on the basis of the balance-sheet, would have been Rs. 50,209 on the date of the transfer. The ITO was, therefore, of the opinion that the provisions of Section 52(1) of the I.T. Act, 1961, were applicable. It was contended on behalf of the assessee that under Section 47(iii) of the Act, a gift was not regarded as transfer of a capital asset and was not assessable to capital gains and the transaction was a deemed gift within the meaning of the definition of the G.T. Act, 1958, The ITO did not accept this contention. He, therefore, treated the difference of a sum of Rs. 46,126 in the value of those shares on the basis of the balance-sheet of the company and the price charged as capital gains, which amounted to Rs. 7,417 already declared by the assessee and included the remaining amount of Rs. 38,709 in the assessment. The assessee preferred an appeal to the AAC. The AAC agreed with the ITO and upheld the addition. The assessee, thereafter, preferred a second appeal before the Tribunal. The Tribunal did not go into the question as to whether Section 47(iii) of the I.T. Act, 1961, contemplated a gift as defined in the Transfer of Property Act or a deemed gift as provided in the G.T. Act, because in its opinion, the assessee was entitled to the relief on the ground that he had been taxed on this very amount in the proceedings under the G.T. Act for that year. In the opinion of the Tribunal, the department in respect of that transaction had treated it as a deemed gift. The assessee had paid the amount of gift-tax so determined. In the opinion of the Tribunal, therefore, it would not be proper, in the interest of justice, to allow the revenue to impose any capital gains tax on that transaction and, in that view of the matter, the Tribunal allowed the assessee's appeal.

(2.) In the premises, under Section 256(1) of the I.T. Act, 1961, the Tribunal has referred the following question to this court:

(3.) In order to consider this question, it would be proper to refer to the relevant sections. Section 2(47) of the I.T. Act, 1961, defines "transfer" for the purpose of the I.T. Act as follows: