Law:

Section:

Section 45 of the Income-tax Act, 1961 (Corresponding to section 12B of the Indian Income-tax Act, 1922) - Capital gains - Chargeable as - Assessment year 1959-60 - Assessee transferred his share in firm to one I.C. in return of I.C. transferring his share holding in a company in favour of assessee - ITO held there was capital gain in transaction - Tribunal held on basis of assessment order in Gift-tax in I.C.'s case that transaction of exchange amounted to gift and that there was no capital gains - Whether Tribunal committed error of law in disposing of appeal solely on ground that in case of I.C. GTO had held that transaction was one in which IC had made a gift to assessee, inasmuch as an order passed under Gift-tax Act in assessment of one assessee would not be binding on ITO while assessing another assessee - Held, yes Section 143 of the Income-tax Act, 1961 - Assessment - General - Whether any order passed under Gift-tax Act in case of one assessee will not be binding on ITO while taking assessment proceedings against another assessee even though transaction giving raise to proceedings under the Gift-tax Act and Income-tax Act against two assessee may be same - Held, yes FACTS The assessee, H.C. was a partner in K, having 35 per cent share therein. In the accounts of the partnership firm a credit balance stood in favour of the assessee on 31-7-1959. On that date, H.C. transferred his share for valuable consideration to his nephew, I.C. the consideration for the transfer being the four hundred shares standing in favour of I.C. in MS. Since thereafter I.C. became the holder of H.C. shares in K and H.C. became the holder of I.C.'s shares in MS. On the basis of the above facts the ITO held that the transaction had resulted in a capital gain to H.C. and taxed the amount under section 12B of the 1922 Act. The AAC allowed the appeal holding that the transaction had caused not a capital gain to the assessee, H.C. but a capital loss on the basis that larger profits were earned during the assessment year by K than 'MS'. While the Tribunal's appeal was pending, in the Gift-tax proceedings of I.C., the GTO held that the transaction of exchange of shares between I.C.…

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