Law:

Section:

Section 45 of the Income-tax Act, 1961 - Capital gains - Chargeable as - Assessee carried on business of sale, purchase and processing of emeralds and other precious stones - This business he continued in his individual capacity up to year 1926, and thereafter stopped his business as an individual and carried similar business as a partner in a partnership firm - In accounting year relevant to assessment year 1974-75, assessee sold some emeralds which he had with him when he stopped his business in 1926 - Assessee claimed that said emeralds were its capital assets and thus no business profits arose therefrom - Whether in view of fact that Tribunal did not try to give finding on question as to whether there was an evidence to disclose that said emeralds which were held by assessee when he closed his business, as an individual 40 years back, were handed over by him to firm of which he became partner, subsequently Tribunal was not right in holding that said emeralds were stock-in-trade of assessee, and this matter was to be referred back to Tribunal for reconsideration of question - Held, yes Facts The assessee carried on business of sale, purchase and processing1 of emeralds and other precious stones. This business he continued in his individual capacity up to year 1926. He, thereafter, stopped his business as an individual, but carried on similar business as a partner in a partnership firm. He ceased to be a partner of the firm also and started similar business as a partner in another firm wherein he continued to be a partner till the year of assessment under consideration, i.e., 1974-75. When the assessee stopped his business in 1926, he had at that time some Tal Khard Emeralds. He sold these emeralds in the accounting year relevant for the assessment year in question and in his returns filed, disclosed it as a sale of capital assets. The ITO, however, did not accept the stand of the assessee and held that the assessee had realised his stock-in-trade, and, therefore, the profit in the shape of said sale realisation was his business profit, the sale taking place in the ordinary course of business. On appeal, the AAC, however, held that the emerald was a capital…

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