1965 (12) TMI 7

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....ee, 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 family money-lending business, considerable quantity of silver and also the said 7 patlas of gold fell to the share of the assessee. The assessee in his individual books in the khata " gold account " entered the valuation of the gold bars at the same figure as was the closing entry in the books of the family immediately before....

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.... 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 further observed that the assessee had valued the gold at Rs. 84,517-10-9 and the balance was carried forward from year to year by the assessee in the account books which he had maintained. The assessee had maintained an account of gold in his books and it appeared from that account that badla transactions in gold were also ent....

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....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 material for the finding of the Tribunal that the assessee had treated the gold bars as his stock-in-trade of the gold business? If the accounts maintained by the assessee himself after the receipt of the gold bars can reasonably lead to the inference that was drawn by the Tribunal that the assessee had treated those gold bars ....

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....nheritance 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, no thought appears to have been given to this aspect and it was only when three of the patlas came to be sold and the department wanted to assess the profit arising therefrom that the question of valuation assumed any real importance. It was then, at the earliest moment, claimed that the real profits and gains could only ....

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....sel 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 purchase and sale of silver on partition " and the stock of silver allotted to the assessee was his stock-in-trade. In the instant case, there is no such finding of any succession and as such there would be no justification in departing from the ordinary rule which obtains in computing profits in the case of assets received ....