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TMI Blog2002 (5) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Income-tax Appellate Tribunal, Delhi Bench "B", New Delhi (hereinafter referred to as "the Tribunal"), for the opinion of this court on the following questions: "1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that for ascertaining the trading result on the sale of shares, the value of the opening stock would continue to be taken at cost as followed by the assessee from year to year? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in allowing the amount of Rs.3,000 as a charge on the income from property received by the assessee on partition and hence 'deductible under section 24(1)(iv) of the Income-tax Act, 1961'?" The assessment year in question is 1977-78, the year ending being December 31, 1976. The assessee was being assessed as an individual. He sold the following shares in the year in question: ----------------------------------------------------------------------- Rs. ----------------------------------------------------------------------- (i) 28641 ordinary shares of New India Industries Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Rs.35 in that year. The Commissioner of Income-tax (Appeals) upheld the order passed by the Assessing Officer. The matter was taken to the Tribunal wherein the learned Tribunal having regard to the fact that the system of valuing the shares at cost had continued in the past held: "20. It may be mentioned that the value of the shares sold in this year has come in the assessee's trading account from the earlier years and as the closing stock of the earlier year had been valued at cost, the same value has been adopted for the opening stock in this year..." The Tribunal held that the principles laid down by the apex court in Bai Shirinbai K. Kooka's case [1962] 46 ITR 86, would not apply as therein the shares had been valued from year to year for a long period on cost basis and the trading results had been worked out on that basis, which had been accepted. The Tribunal observed that from the point of view of accountancy where a consistent method is adopted and the valuation of stock is done in a regular manner, the variation adopted by the Income-tax Officer (in short "the ITO") would not be justified. Referring to the decision of the apex court in the case of Investment Ltd. v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt Saboo Ltd. [1979] 116 ITR 125 (SC), learned counsel would contend that the date of conversion is relevant. As regards his contention that a wrong method could not have been a ground for allowing the claim of the petitioner, strong reliance has also been placed by Mr. Khanna on CIT v. British Paints India Ltd. [1991] 188 ITR 44 (SC). As regards the second question, learned counsel would contend that the finding of the learned Tribunal to the effect that section 24(1)(iv) of the Act would have no application in the instant case having regard to clause 16 of the deed of partition is erroneous. Reliance in this connection has been placed on CIT v. Central Bank Executor and Trustee Co. Ltd. [1993] 203 ITR 666 (Bom); CIT v. Murlidhar Kanodia and Sons (HUF) [1993] 204 ITR 760 (All) and CIT v. Smt. Indramani Devi Singhania [1991] 189 ITR 124 (All). Re.: Question No. 1: In Bai Shirinbai K. Kooka's case [1962] 46 ITR 86, it has been held by the apex court that the profit from the sale of shares will be assessable and such profit would be the difference between the sale price of the shares and the market price thereof prevailing on the date when such conversion took place and not the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should not be written down below the cost price except where there is an actual or anticipated loss. On the other hand, if the fall in the price is only such as it would reduce merely the prospective profit, there would be no justification to discard the initial valuation at cost..." There cannot be any doubt whatsoever that the conversion of opening stock and closing stock was relevant when the sale took place. In Gangadhar Babu Lal v. CIT [1966] 62 ITR 718 (All), it is stated: "Property which a coparcener receives on partition would be capital in his hands. It is open to the petitioner on receipt of a capital asset to retain it as such or to convert it into stock-in-trade and 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. No general principle could be laid down which would be applicable to all cases and each case must be decided on its own circumstances according to commonsense principles." We, therefore, are of the opinion that the judgment of the learned Tribunal cannot be upheld. The answer to the second quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the words 'by operation of law'. If that was the intention of Parliament, it would have used the words 'by act of parties', which is the expression generally understood as the opposite of the words 'by operation of law'. In clause (iv), the expression used is 'voluntarily', which must be under stood as distinct from, and as opposed to, the expression 'involuntarily'. The word 'involuntarily' means, without there being any option, i.e., under an enforceable obligation. Hence, where a person creates an annual charge to meet an existing, genuine, legal or contractual obligation, it would not be a case of creating a charge voluntarily." We, however, for the reasons stated hereinabove, cannot subscribe to the said view. Even on a different occasion, the same learned judge in Smt. Indramani Devi Singhania's case [1991] 189 ITR 124 (All) has taken a different view. In that view of the matter, we are of the opinion that the impugned judgment of the learned Tribunal cannot be upheld even on the second question. For the reasons aforementioned, we answer the questions referred to for our opinion in the negative, i.e., in favour of the Revenue and against the assessee. This refer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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