Partitioned property remains a capital asset absent clear evidence it was brought into stock-in-trade of business.

Immovable properties allotted on partition were treated as capital assets in the assessee's hands unless clear and affirmative evidence showed that they were taken over as stock-in-trade of the assessee's own business. Mere common bookkeeping or use of income from the properties in the money-lending business did not convert their character into trading assets. On that basis, the sale proceeds were not taxable as business income, and the properties remained capital assets rather than stock-in-trade.

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Issues: Whether the immovable properties allotted to the assessee on partition and later sold by it were stock-in-trade of the money-lending business so that the sale profits were taxable, or whether they remained capital assets in the assessee's hands.

Analysis: The properties, though previously part of the stock-in-trade of the larger family, became capital assets in the assessee's hands on partition unless there was clear and unmistakable evidence that they were taken over as part of an existing business or were subsequently brought into the assessee's own money-lending business as trading assets. Mere entry of the properties and money-lending transactions in the same set of books, or the use of income from the properties for the business, was not enough to convert the capital assets into stock-in-trade. The Tribunal's conclusion rested on insufficient material and overlooked that the properties were shown as capital in the books.

Conclusion: The sale proceeds of the 34 properties did not constitute business income assessable as profits from stock-in-trade; the finding that they were trading assets was not sustainable, and the answer was in favour of the assessee.

Final Conclusion: The reference was answered against the Revenue and the disputed properties were held to be capital assets in the assessee's hands, so the resulting profits were not taxable as business income.

Ratio Decidendi: Property received on partition is treated as capital in the recipient's hands unless there is clear and affirmative evidence that it was brought into or continued as stock-in-trade of the recipient's business; mere common bookkeeping or use of income in the business does not alter its character.

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