1987 (4) TMI 55 - HC - Income Tax

Summary

Issues Involved:
1. Whether the agricultural land transferred to the partnership firm constituted a transfer of a capital asset within the meaning of section 2(14) read with section 2(47) of the Income-tax Act, 1961.
2. Whether the profit realized on the transfer of agricultural land was liable to tax under section 45 of the Income-tax Act, 1961.
3. Whether the Appellate Tribunal was right in not remanding the matter to the Income-tax Officer for redeciding the issue based on the Supreme Court's decision in Sunil Siddharthbhai v. CIT.

Summary:

Issue 1: Transfer of Capital Asset
The Income-tax Officer concluded that the agricultural land transferred by the Hindu undivided family to the partnership firm constituted a transfer of a capital asset within the meaning of section 2(14) read with section 2(47) of the Income-tax Act, 1961. The Commissioner of Income-tax (Appeals) disagreed, stating that the land was never put to any use other than agricultural use and could not be considered stock-in-trade. The Appellate Tribunal confirmed the Commissioner's decision, relying on the Supreme Court's judgment in Sunil Siddharthbhai v. CIT, which held that the value of the transferred asset could not be evaluated immediately and was only notional.

Issue 2: Taxability of Profit
The Income-tax Officer added an amount of Rs. 1,32,172 as capital gains to the net income of the assessee, asserting that the profit realized on the transfer was liable to tax u/s 45 of the Act. The Commissioner of Income-tax (Appeals) and the Appellate Tribunal both concluded that there was no transfer within the meaning of section 2(47) of the Act, and hence, no profit was realized that could be taxed under section 45.

Issue 3: Remand for Further Inquiry
The Revenue sought a remand for further inquiry into the genuineness of the transaction and the firm, based on the Supreme Court's observations in Sunil Siddharthbhai v. CIT. The Tribunal refused this request, noting that the Income-tax Officer had never doubted the genuineness of the firm or the transaction. The High Court upheld this decision, stating that there were no foundational facts to doubt the genuineness of the firm or the transaction and that allowing a remand would result in unnecessary harassment and hardship to the assessee.

Conclusion:
The High Court answered the question in the affirmative, in favor of the assessee and against the Revenue, concluding that the Appellate Tribunal was right in not remanding the matter for further inquiry. The reference was disposed of with no order as to costs.