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Interpretation of section 47(iii) of the Income-tax Act, 1961 for assessment years 1965-66 and 1966-67. Analysis: The case involved the interpretation of section 47(iii) of the Income-tax Act, 1961 for the assessment years 1965-66 and 1966-67. The assessee, a private limited company, had transferred certain shares which were not normally quoted in the stock market. The Income-tax Officer calculated the price of the shares at a higher value than the transfer price, treating it as "capital gains." However, the Tribunal's earlier decision that the assessee was not a dealer in shares was challenged based on a subsequent court decision. The Appellate Assistant Commissioner held the profits as assessable under "Capital gains," but following a Kerala High Court judgment, section 52 could not be invoked, leading to the deletion of additions made by the Income-tax Officer. The Income-tax Appellate Tribunal noted a reversal of the Kerala High Court judgment by a Full Bench and applied the judgment of the High Court to exclude the transfers as "gifts" under section 47(iii) of the Income-tax Act, thereby avoiding taxation as "capital gains." However, the Supreme Court later reversed the Full Bench judgment, upholding that section 52(2) could not be invoked. Consequently, the question referred to the court became redundant due to the reversal of the Kerala High Court decision and the previous court's holding that the assessee was a dealer in shares. The court determined that the income should be treated as "business income" rather than "capital gains," rendering the question irrelevant. Even if the question were to be answered, it would be in favor of the assessee. The court concluded that the question referred had become redundant and, if applicable, should be answered in favor of the assessee. The judgment highlighted the evolving interpretations of tax laws and the impact of subsequent court decisions on earlier rulings. The court's analysis emphasized the significance of legal precedents and their influence on tax assessments, ultimately leading to the conclusion that the question referred was no longer relevant due to changed circumstances and legal developments.
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