TaxTMI 
TaxTMI 
2002 (5) TMI 31
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.... 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 Ltd. at Rs. 3 85,923 (ii) 105870 deferred shares of New India Industrie....
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....---------------------------------- Opening stock of share 4,85,898.00 Sale 1,21,884.00 Closing stock 2,46,510.45 Loss 1,17,103.59 ----------------------------------------------------------------------- The contention of the assessee that the said amount be treated to be as loss was not accepted by the Assessing Officer, inter alia, on the ground that when the assessee transferred the shares from the i....
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.... in terms of the deed of partition. A stipulation was made in the said deed to the effect that the assessee was to maintain his mother. He claimed Rs.3,000 towards maintenance of his mother on the ground that the said sum should be allowed as a charge against the income form property. The Commissioner of Income-tax (Appeals) held that the said charge had been created by the assessee voluntarily. The Tribunal, however, directed that the same should be allowed as a deduction and should not be considered to be a charge created by the assessee voluntarily. In the aforementioned situation, the questions, as set out above, were referred for the opinion of this court. Mr. Sanjiv Khanna, learned counsel appearing on behalf of the Revenue, would submit that the assessee could not take benefit of his action of converting into investment shares into the trading shares in the year 1964 and, thus, while making assessment for the assessment year 1977-78, the Assessing Officer had correctly valued the shares sold at the market price in 1964 and ascertained the profit on such transaction. Learned counsel would contend that only because a wrong method had been adopted for a long time by th....
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....essment. The question as to whether the Department has at any point of time disturbed the trading result as shown by the assessee or could direct change in the base of conversion is not relevant. The question, which fell for consideration before the Tribunal, could have been determined only during the relevant assessment year and not prior thereto. A wrong method of assessment carried out by the assessee per se cannot be a ground for non-levy of tax, if the same is otherwise leviable having regard to the decision of the apex court. A wrong method of maintenance of accounts, in our opinion, can be corrected during the relevant year, particularly when the principles of res judicata have no application. Furthermore, it has rightly been submitted by Mr. Khanna that the conversion of opening stock and closing stock became relevant only when the sale took place. In Groz-Beckert Saboo Ltd.'s case [1979] 116 ITR 125 (SC), the law has been stated in the following terms: "It is now well settled by these decisions that where an assessee converts his capital assets into stock-in-trade and starts dealing in them, the taxable profit on the sale must be determined by deducting f....
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....andum of agreement of partition. Such charge, thus, has not been created by operation of law, nor by reason thereof has any devolution subject to charge taken place. In Central Bank Executor and Trustee Co. Ltd.'s case [1993] 203 ITR 666, the Bombay High Court has stated the law in the following terms: "A charge which is (1) either not created by the assessee or (2) which is not created by the assessee voluntarily in the sense that it is created or thrust upon the assessee either by operation of law or by a decree of a court or by the act of his predecessor in title or by reason of the property coming into his hands with an existing or overriding charge, will have to be treated as an involuntary charge for the purpose of section 24(1)(iv) of the Income-tax Act, 1961. The language of section 24(1)(iv) incorporates the concept of a charge being voluntarily created by the assessee as against a charge which comes into being by operation of law or by virtue of an order of the court or by the act of parties other than the assessee such as when the assessee gets a property already subject to a charge. Only those annual charges which are not created by the assessee voluntarily in thi....