1983 (5) TMI 78 - AT - Income Tax

Summary

Issues:
1. Inclusion of interest income accruing to the minor in the hands of the assessee under section 64 of the IT Act.
2. Treatment of undisclosed income credited in the account of the assessee in a firm.
3. Taxability of difference in value of transferred emerald stone as revenue profit.

Analysis:

Issue 1:
The appeal concerned the inclusion of interest income accruing to the minor in the hands of the assessee under section 64 of the IT Act. The ITO had included the interest income in the share income of the minor son, which was disputed. The Appellate Tribunal noted that the interest on the minor's deposit was not necessary for his admission to the benefit of partnership. Therefore, the interest earned by the minor on his deposit in the firm was not deemed to arise due to his admission to the partnership. Consequently, the Tribunal upheld the order of the AAC in excluding the interest income from the assessee's taxable income.

Issue 2:
Regarding the undisclosed income credited in the account of the assessee in a firm, the ITO treated the credit of Rs. 8,925 as income from undisclosed sources. However, the assessee contended that the amount represented the transfer of emerald stones at market value, not a cash deposit. The AAC accepted the assessee's explanation, ruling out any undisclosed income. The Tribunal concurred, further stating that the difference in value of the transferred emerald stone could be considered as capital gains, not revenue profit, as per the Supreme Court's decision. The Tribunal dismissed the revenue's argument, upholding the AAC's decision.

Issue 3:
The final issue revolved around the taxability of the difference in value of the transferred emerald stone as revenue profit. The revenue contended that the gain should be taxed as revenue receipt. However, the assessee's representative argued that the assets should be treated as stock in trade, not resulting in profit as per the Supreme Court's decision. The Tribunal agreed with the assessee's representative, emphasizing that no profit would arise if the transferred goods were considered stock-in-trade. Therefore, the Tribunal found no merit in the revenue's argument and dismissed the appeal.

In conclusion, the appeal was dismissed, upholding the decisions of the lower authorities regarding the treatment of interest income accruing to the minor and the undisclosed income credited in the assessee's account in a firm.