Law:

Section:

Section 28(i) of the Income-tax Act, 1961 [Corresponding to section 10(1) of the Indian Income-tax Act, 1922] - Business income - Chargeable as - Assessee's father and his divided brother purchased a leasehold interest of a rubber estate - Until 30-4-1950, assessee's father and his five sons constituted a HUF, but on that date, there was a partition in family and business was converted into a partnership consisting of assessee's father and his five sons - Estate in question was allotted to firm and later account of firm was credited and assessee's were debited with proportionate cost of share in estate - Later estate was compulsorily acquired by Government and assessees were paid compensation of certain sum - ITO brought surplus over cost of estate to tax on ground that estate formed part of stock-in-trade of firm - Whether asset in hands of assessees after 30-4-1950 was capital and since to show whether in accounts of firm this asset was treated as stock-in-trade or shown separately in ledger folio, amount in question was not chargeable to tax as revenue receipt - Held, yes FACTS Assessee's father and his divided brother purchased leasehold interest in rubber estate in question for a consideration of 30,900 dollars on 25-6-1940, of which the assessee's father contributed one-third. They jointly worked the rubber estate and derived income, which was considerable at the beginning, but due to enemy occupation between 1942 and 1945 when the estate was damaged, the income dwindled to practically nothing in most of the following years. Until 30-4-1950, assessee's father and his five sons constituted a HUF, but on that date there was a partition, and as a result, the business was converted into a partnership consisting of the erstwhile members of the joint family with effect from 1-5-1950. This firm owned a number of estates including the estate in questions and this firm did money-lending business and also was engaged in trade of purchase and sale of lands. For the year 1951-52, a consolidated profit and loss account was drawn up for the accounting period ended 31-12-1950, and the income up to 30-4-1950, was attributed to the family and the balance to the firm. The…

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