Law: Income Tax Act, 1922

Section: 3

Section 4 of the Income-tax Act, 1961 [Corresponding to section 3 of the Indian Income-tax Act, 1922] - Income - Chargeable as - Assessment year 1956-57 - In course of money-lending business carried on by one 'K' an estate was purchased - That estate was treated as stock-in-trade - 'K' died in 1935 and firm was dissolved - Estate in dispute was allotted to share of assessee - During relevant accounting year assessee sold part of estate and claimed amount realised as capital receipt - However, ITO calculated cost price of estate purchased and treated excess amount as revenue receipt taxable in hands of assessee - On second appeal assessee raised a fresh contention that estates were in nature of capital investment made by quondam money-lending firm and that sale was capital receipt - Whether it was open to Tribunal to permit assessee to raise contention for first time, though it might involve an investigation of fresh facts - Held, yes - Whether, on facts, profits on sale of estate was assessable as revenue receipt in hands of assessee - Held, yes FACTS One 'K' and 'A' were partners in a firm carrying on the business of money lending. 'K' died in 1935 and the partnership became dissolved. In the course of that money-lending business, an estate was purchased and it was not in dispute that this estate was a stock-in-trade of the money-lending business at the time of the acquisition. On dissolution of the firm, this estate was allotted to the share of the assessee, and he had been assessed to tax on his income. In the assessment proceedings it was not disputed that the properties acquired by the partnership represented stock-in-trade of the business. During the accounting year relevant to the assessment year 1956-57, the assessee sold part of the land. The ITO calculated the cost price of the estate purchased in 1930-31 and took the view that the excess was revenue receipt which could be brought to tax. On second appeal to the Tribunal the assessee raised a contention that the properties were really in the nature of capital investment made by the quondam money-lending firm, and that the sale of capital asset realising more income than what was invested would be a…

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