1993 (7) TMI 23 - HC - Income Tax

Summary

Issues Involved:
1. Nature of the transaction (Capital Asset vs. Stock-in-Trade)
2. Assessment Year for Capital Gains
3. Jurisdiction of Appellate Assistant Commissioner
4. Maintainability of Appeal against Levy of Interest u/s 217

Summary:

Issue 1: Nature of the Transaction
The Tribunal held that the purchase and sale of the Fort property by the assessee-company was a transaction of a capital asset and not an adventure in the nature of trade. The property was acquired as a capital asset from the holding company and retained as such. The Tribunal observed that the mere entry of the property as "stock-in-trade" in the assessee's books did not change its nature. The High Court agreed with the Tribunal's findings, emphasizing that the true nature of the transaction must be determined by the totality of facts and circumstances, not just book entries.

Issue 2: Assessment Year for Capital Gains
The Tribunal initially held that the income from the sale of the property should be assessed in the financial year 1967-68, corresponding to the assessment year 1968-69. However, the High Court disagreed, stating that the "previous year" for the source of income was the accounting year ending on August 31, 1968, making the relevant assessment year 1969-70. The Court clarified that the "previous year" is related to the "source of income" and not the "head of income." Hence, the income from the transaction was assessable in the assessment year 1969-70.

Issue 3: Jurisdiction of Appellate Assistant Commissioner
Given the High Court's answer to Issue 2, the question of whether the Appellate Assistant Commissioner had jurisdiction to entertain the ground against the levy of interest u/s 217 became academic and was not addressed.

Issue 4: Maintainability of Appeal against Levy of Interest u/s 217
The High Court held that an appeal against the levy of interest u/s 217 is maintainable. The Court referenced the Supreme Court's decision in Central Provinces Manganese Ore Co. Ltd. v. CIT, which allows for such appeals when the dispute pertains to the liability of the assessee to pay the interest itself.

Conclusion:
1. The transaction was a purchase and sale of a capital asset, not stock-in-trade.
2. The income from the transaction is assessable in the assessment year 1969-70.
3. The question of jurisdiction of the Appellate Assistant Commissioner became academic.
4. An appeal against the levy of interest u/s 217 is maintainable.