Law:

Section:

Section 28(1) of the Income-tax Act, 1961 (Corresponding to section 10(1) of Indian Income-tax Act, 1922) - Business income - Chargeable as - Assessment years 1945-46 and 1946-47 - On death of karta, assessee-HUF received certain shares from firm in which karta was partner in satisfaction of amount standing in name of karta - Thereafter, assessee-HUF started sale and purchase of shares - For earlier year, Tribunal held that income from sale and purchase of shares was business income - This finding being based on surmises was reversed by Supreme Court - In relevant assessment years, Tribunal passed order following its decision in earlier assessment year which had been subsequently reversed by Supreme Court - Whether, on facts, Tribunal's order for assessment years in question was invalid and bad in law - Held, yes FACTS Karta of the assessee-HUF during his life time, was partner in a firm. On his death, partnership was dissolved and new firm took over all assets and liabilities of dissolved firm. In satisfaction of the amount standing in the name of deceased karta, new firm transferred certain shares to HUF. During the life time of karta, assessee-HUF was not doing any business in shares but after they received shares from the firm, they started selling a substantial part of shares in the market and also purchased some shares. For the assessment year 1944-45, the Tribunal held that income of HUF from the said purchases and sales of shares was business income and was taxable as such. The High Court affirmed the order of the Tribunal but the Supreme Court held that the order of the Tribunal was unsustainable as the Tribunal had drawn upon its own imagination and had made use a number of surmise and conjectures in reaching its result. The case was therefore remanded to the Tribunal for fresh disposal. When the Tribunal considered the matter afresh it held that the transference of the shares by the partnership to the HUF was a genuine one and that if thereafter the HUF purchased some shares and sold others they did that only with a view to altering their investments and not with a view to making a gain in business in stocks and shares. For the assessment years in…

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