Taxability of jewellery sale surplus turns on whether assets were stock-in-trade or trading adventure; no income found.

Surplus realised by a Hindu undivided family on sale of jewellery and ornaments to foreigners was held not assessable as income under the Income-tax Act, 1961 because the Tribunal's factual findings showed the items were not stock-in-trade, and the sales were neither in the course of business nor an adventure in the nature of trade. Those findings were not successfully challenged and could not be reappraised in advisory jurisdiction under section 256(2). On that basis, the surplus did not fall within the definition of income under section 2(24)(i). The question of capital gains under section 45 read with section 2(24)(vi) was not referred.

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Issues: Whether the surplus realised by a Hindu undivided family on sale of jewellery and ornaments to foreigners was assessable as income under the Income-tax Act, 1961.

Analysis: The Tribunal had found, on appraisal of the evidence, that the ornaments sold were not stock-in-trade of the assessee's jewellery business and that the sales were neither in the course of business nor an adventure in the nature of trade. Those findings of fact were not successfully challenged and could not be reappraised in advisory jurisdiction under section 256(2) of the Income-tax Act, 1961. On those findings, the surplus did not fall within income as defined in section 2(24)(i) of the Income-tax Act, 1961. The question of capital gains under section 45 of the Income-tax Act, 1961, read with section 2(24)(vi) of the Income-tax Act, 1961, was not referred for consideration.

Conclusion: The surplus from sale of the jewellery and ornaments was not taxable as income, and the question was answered in favour of the assessee and against the Revenue.

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