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TMI Blog1993 (10) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... were not 'stock-in-trade' but 'capital assets' within the meaning of section 2(14) of the Income-tax Act ? (2) Whether the Tribunal was justified in holding that the contribution of precious stones towards the capital in the partnership firm amounted to transfer of a capital asset within the meaning of section 2(47) of the Income-tax Act and gain arising out of that is liable to be taxed under section 45 of the Income-tax Act?" The brief facts of the case are that the assessee made a declaration under section 3(1) of the Voluntary Disclosure Scheme, 1975, of income of Rs. 24,720 on December 30, 1975. The said income represented the stock of cut emeralds. The assessee transferred the entire stock worth Rs. 24,720 after revaluing the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eralds in the earlier years, it cannot be considered that the cut emeralds are not capital assets. On an interpretation of the provisions of the Voluntary Disclosure Scheme, the appellate authority came to the conclusion that the said cut emeralds represented the assessee's capital assets. On the second question also he came to the conclusion that in view of the decisions of the apex court in CIT v. Hind Construction Ltd. [1972] 83 ITR 211 and CIT v. Dewas Cine Corporation [1968] 68 ITR 240, there was no transfer and, therefore, the addition is liable to be deleted. In the second appeal before the Income-tax Appellate Tribunal, it was found that since the firm is carrying on the business of cut emeralds the said business should be deemed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firm in which he is a partner, the property in question would belong to the firm and that there would be transfer within the meaning of section 2(47) when the individual assets are transferred to the firm. We have considered the matter and are of the opinion that the reasoning which has been given and the finding of fact which has been arrived at by the Income-tax Appellate Tribunal in this regard that the cut emeralds were stock-in-trade, is not substantiated by any evidence on record and, therefore, the same cannot be considered as stock-in-trade and is a finding of fact and is based on cogent reasons. A person may carry on the business in any line which may be different from the business of a firm in which the firm is carrying on the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for converting the assets into money, the Income-tax Officer is entitled to penetrate the veil covering it and ascertain the truth. Following the view of the apex court, there was a transfer of a capital asset within the meaning of section 2(47) and the Income-tax Appellate Tribunal was justified in holding that the contribution of the precious stones towards the capital asset in the partnership firm amounted to a transfer of capital asset within the meaning of section 2(47) of the Income-tax Act. But, so far as the liability of capital gains tax under section 45 is concerned, this court has already followed the decision of the apex court in Sunil Siddharthbhai v. CIT [1985] 156 ITR 509, wherein it was held that the assessee is not liable t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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