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Issues:
1. Interpretation of section 41(1) of the Income Tax Act, 1961 in the context of assessing profit on sale of shares. 2. Determination of whether a change in the status of the assessee from individual to Hindu Undivided Family (HUF) affects the applicability of section 41(1). Analysis: The case involved an assessee who was initially assessed as an individual in the year 1951-52 and claimed a business loss on the sale of shares. Subsequently, in the assessment year 1965-66, the assessee's status changed to HUF, and the Income Tax Officer (ITO) considered the earlier claimed loss as deemed profit under section 41(1) of the Income Tax Act, 1961, as the shares were sold for a price similar to the purchase price. The assessee appealed the decision, leading to a series of appeals culminating at the Tribunal level. The primary issue before the High Court was the interpretation of section 41(1) concerning the treatment of the earlier claimed loss as profit in the changed status of the assessee. The Tribunal, while refusing to refer the initial question raised by the assessee, framed a different question related to the profit assessable under section 41(1) for the High Court's opinion. The assessee contended that the change in status from individual to HUF impacted the application of section 41(1), as there was no identity of status between the two assessment years. The High Court, after considering the arguments, held that the question of the applicability of section 41(1) was indeed raised before the Tribunal, and the contention regarding the difference in status was a part of the same issue. The Court emphasized that when a question is under dispute, there is no restriction that the reference should be limited to arguments presented before the Tribunal. Citing precedent, the Court clarified that each aspect of a question does not constitute a distinct question, and thus directed the Tribunal to submit a supplementary statement of the case to refer the question in the form originally formulated by the assessee. In conclusion, the High Court's decision clarified that the change in status from individual to HUF does not preclude the application of section 41(1) if the core issue of the section's applicability is under contention. The Court's ruling highlighted the importance of addressing all aspects of a question raised before the Tribunal, ensuring a comprehensive review of the legal issues involved.
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