1968 (12) TMI 24 - HC - Income Tax

Transfer of shares of deceased partner to HUF - whether the inference of the Tribunal, that the shares in question constituted the stock-in-trade and that the profit on sale is a trading profit, is legal

Summary

Issues involved:
Assessment of income as trading profit or capital receipt from shares in question for the assessment years 1945-46 and 1946-47.

Detailed Analysis:
The case involved the assessment of income from shares in question as trading profit or capital receipt for the years 1945-46 and 1946-47. The dispute arose when the Income-tax Officer assessed the income as business income, which was later reversed by the Appellate Assistant Commissioner, only to be reinstated by the Tribunal. The Tribunal held that the shares were transferred to evade income tax and that the family intended to deal in shares from the start. The Supreme Court, however, found the Tribunal's decision unsustainable due to reliance on surmises and conjectures, remanding the case back to the High Court for further review.

The Tribunal, upon reconsideration, favored the assessee, stating that the income was a capital receipt, not business income. They highlighted the genuineness of the transfer and the lack of evidence indicating a business intention. The Tribunal's doubts on the transfer's genuineness were deemed irrelevant as the department had not contested it. The subsequent findings were against the department, affirming the genuine nature of the transfer and the family's investment intent.

For the assessment years 1945-46 and 1946-47, the Tribunal merely referenced its earlier decision for 1944-45, awaiting the Supreme Court's decision on the latter. The Tribunal did not delve into the current assessment years' specifics, relying on the previous decision. The High Court declared the Tribunal's inference that the shares constituted stock-in-trade and the profit was trading profit as illegal, echoing the Supreme Court's concerns about reliance on conjectures. The Tribunal was directed to provide a fresh finding on the matter, with costs awarded to the Commissioner.

Additionally, the High Court criticized the inclusion of subsequent years' orders in the case statement as irrelevant, ordering their removal. The statement should have focused solely on matters related to the current case. The High Court allowed the removal of the irrelevant details without costs, reiterating the need for a concise and pertinent case statement.

In conclusion, the High Court's judgment emphasized the importance of factual evidence over conjectures in determining the nature of income from shares, highlighting the need for a legal and substantiated basis for tax assessments.