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TMI Blog1965 (12) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... profits, the value of the patlas of gold should not have been made on the basis of the market price on the date of the partial partition ? " The material facts that emerge from the statement of the case are these. The relevant year of assessment is 1947-48, the previous year being the year ending 22nd October, 1946. The assessee, Babu Lal, who was the karta of the Hindu undivided family of Gangadhar Babulal, was carrying on money-lending business and was also trading in gold, silver and guineas and the profit made on these transactions was being returned and assessed to tax by the department. In this reference we are only concerned with the transactions in three patlas (gold bars). The Hindu undivided family had purchased two patlas of gold in Samvat year 1997-98. During the Samvat year 1998-99, it purchased five more patlas on three different dates. There were no transactions in gold bars in 1999-2000. These transactions were entered in the books of the Hindu undivided family in the khata "gold account". At the end of Samvat 2000 the balance to be carried forward in this account was Rs. 84,517-10-9. Meanwhile, on June 7, 1943, there was a partial partition of the business. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion as also the other contention of the assessee that, even if the aforesaid sum was profit of an adventure in the nature of trade, neverthless the computation of profit was erroneous as the difference had to be taken between the sale price and the market price as on June 7, 1943, the date of the partition when the asset came into his hands and was treated by him as part of his stock-in-trade and not on the cost price of the gold bars to the family which was the valuation taken by the assessee in his books of account. Before the Tribunal it was contended that the family had not done any business in gold and that the gold never formed part of its stock-in-trade. In any event it was argued that the valuation of the gold bars had to be taken on the basis of the market price as on June 7, 1943, and not at the cost price to the family. On the first contention the finding of the Tribunal was that the erstwhile Hindu undivided family carried on business in gold and silver and the patlas of gold were stock-in-trade in the accounts mentioned by the Hindu undivided family and that the assessee's accounts also showed that they were treated by the assessee as stock-in-trade. The Tribunal fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nto a stock-in-trade. It will be a question of fact to be decided on the materials in each case as to whether the assessee had continued to treat the capital asset as an investment or had converted it into his stock-in-trade. The Supreme Court in Narain Swadeshi Weaving Mills v. Commissioner of Excess Profits Tax reiterated that no general principle could be laid down which would be applicable to all cases and that each case must be decided on its own circumstances according to commonsense principles. In G. Venkataswami Naidu Co. v. Commissioner of Income-tax, after laying down various tests for resolving such questions, the Supreme Court again observed : "We thus come back to the same position and that is that a decision about the character of a transaction in the context cannot be based solely on the application of any abstract rule, principle or test and must in every case depend upon the relevant facts and circumstances." The legal position not being in doubt, it is unnecessary to refer to other cases cited by Mr. Gulati which were decisions on the particular facts of those cases. The short question, as already observed, in the present case, is whether there was any mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e circumstances the finding of the Tribunal cannot be said to have been based on no material and the first question will therefore have to be answered in the affirmative and against the assessee. As regards the second question, ordinarily speaking, when a person receives anything as a result of gift, succession, will, inheritance or as a windfall, the receipt is capital in his hands. If such asset is a capital asset, then the valuation thereof necessarily on the day when he receives it will have to be put at the market value. Of course, it is open to the assessee to make the valuation on the basis of cost to his donor, predecessor, etc., or at the market value but that option must be deliberately exercised in order to hold him bound by it. In the present case it is quite obvious that the assessee never applied his mind to the valuation of the gold bars received by him as his share in the partial partition of the business assets of the family. He appears to have automatically carried over the valuation as appearing in the books of his Hindu undivided family firm and entered it in his gold account. In the Samvat year 2000-2001, which was the first year after the partial partition, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares at a profit, the assessable profit on the sale of the shares was held to be the difference between the sale price and the market price on the day when the investment in shares was converted into a business in shares and not the price at which they were originally purchased by the assessee. Shri Das, learned counsel for the department, however, contended that a Bench of this court in the case of this very assessee in Gangadhar Babulal v. Commissioner of Income-tax, to which one of us was a party, had already taken the view that it was not open to the assessee who had received the silver business from the family on partial partition to claim the valuation of the stock at its market price in computing the profits and as such the answer to the second question must be in favour of the department. There is no force in this contention. That was a case no doubt of the same assessee for the earlier year in respect of the silver business which had fallen to his share upon partial partition of the family. The facts of that case, however, are distinguisbable from the present inasmuch as the finding of the Tribunal there was that the assessee " had succeeded to the business of the purc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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