1968 (2) TMI 10 - HC - Income Tax

Money-lending business - Whether the assets constituted the stock-in-trade of the business - Held, no

Summary

Issues:
Character of receipt from sale of immovable property for taxation as income or capital gain.

Analysis:
The judgment addressed the issue of whether the receipt from the sale of three immovable properties should be taxed as income or capital gain. The case involved a Hindu undivided family engaged in money-lending business, where the assets were divided between the assessee and his brother through partitions in 1957. The question was whether the assets sold constituted stock-in-trade of the money-lending business and if the amount was taxable as income. The Tribunal concluded that the assets were part of the money-lending business, considering the assessee's treatment of the properties in his business accounts and the use of income and sale proceeds in the money-lending activities.

The judgment highlighted that the determination of whether an asset is capital or stock-in-trade involves a mixed question of law and fact. It referenced a previous case law stating that when a member of a joint Hindu family receives a share at partition, it is considered capital unless treated as stock-in-trade. The conversion of a capital asset into stock-in-trade depends on the facts of each case, and there is no presumption regarding the character of the asset. The revenue must demonstrate facts supporting the treatment of a capital asset as stock-in-trade.

The court emphasized that the Tribunal's reliance on the assessee's use of income and sale proceeds in the money-lending business was justifiable evidence to infer the intention of treating the properties as stock-in-trade. Despite a possible different conclusion on appeal, the Tribunal's decision was supported by the assessee's actions and treatment of the properties. The Tribunal correctly applied the law and had sufficient material to support its conclusion, indicating no misdirection in its decision.

Ultimately, the court answered the question against the assessee, confirming that the receipt from the sale of immovable properties should be taxed as income. The judgment concluded with no costs awarded to either party, maintaining the decision in favor of taxation as income.