2004 (8) TMI 41 - HC - Income Tax

Business profit - stock-in-trade - Settlement Commission, by the impugned order had held that the profit arising out of the sale of silver in question should be assessed as business profit for the assessment year 1993-94 as the silver was stock-in-trade - In view of the aforementioned findings of the fact recorded by the Commission which are based on appreciation of evidence and material on record, the irresistible conclusion is that the silver was either stock-in-trade or raw material of the petitioner and by no stretch of imagination, can it be treated as capital asset. Thus there is no infirmity in the order which requires any interference by this court under article 226 of the Constitution of India. - The writ petition lacks merit and is, accordingly, dismissed in limine.

Summary

Issues:
1. Whether the profit from the sale of silver should be assessed as business profit or capital gains.
2. Whether the silver in question should be considered as stock-in-trade, raw material, or a capital asset.

Analysis:
1. The petitioner, engaged in job work of manufacturing silver chains, sold 536 kilograms of silver during the financial year 1992-93 for a total sum of Rs. 41,78,937. The Income-tax Settlement Commission held that the profit from the sale of silver should be assessed as business profit for the assessment year 1993-94 as the silver was considered stock-in-trade. The petitioner argued that the silver was a capital asset and the profit should be assessed as capital gains. The court noted that the petitioner acquired the silver over the years and the Commission's findings indicated that the silver was either stock-in-trade or raw material for the petitioner's business, not a capital asset. Therefore, the court upheld the Commission's decision to assess the profit as business profit, dismissing the writ petition.

2. The petitioner contended that since he was only doing job work of silver chains and not selling silver directly, the silver should be treated as a capital asset, not stock-in-trade or raw material. However, the Commission found that the petitioner was exchanging ready-made silver chains for silver with other silver smiths, keeping stock of silver chains for future orders, and purchasing silver partially from funds allocated for business purposes. Based on these findings, the court concluded that the silver was indeed stock-in-trade or raw material for the petitioner's business, supporting the Commission's decision to assess the profit as business profit. Consequently, the court dismissed the writ petition, stating that there was no basis for interference under Article 226 of the Constitution of India.