TMI Blog2008 (1) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... tion that in the sale of calves no cost of acquisition is involved and hence, the question of income by way of capital gain does not arise?" 2. The facts which are essential to be adumbrated for adjudication of this appeal are that the assessee is running a dairy and sells cow milk. The Assessing Officer observed that the assessee had claimed depreciation of calves forming a part and parcel of the livestock and, therefore, it was stock-in-trade of the assessee and the income from the sale of such stock- in-trade is liable to tax. Thus, the Assessing Officer treated the calves to be stock-in-trade and assessed it to tax. 3. Being dissatisfied with the aforesaid order the assessee preferred an appeal and the appellate authority dislodged the finding of the Assessing Officer and deleted a sum of Rs. 68,000. 4. Being aggrieved by the order passed by the appellate authority, the Revenue preferred an appeal before the Income-tax Appellate Tribunal (for short "the Tribunal") which concurred with the view expressed by the appellate authority. 5. We have heard Mr. Rohit Arya, learned senior counsel along with Mr. S. Lal for the Revenue, and Mr. Sumit Nema and Mr. Mukesh Agra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee submitted that the sale of calves has to be put in the compartment of capital receipt which is to be taxed in accordance with the provisions of section 45 of the Act and its computation has to be made in accordance with section 48. It is pro pounded by him that in the present case the cost of acquisition of the calves cannot be ascertained because there are no expenses directly attributed towards bringing them into existence inasmuch as all the expenditure is in the nature of revenue expenditure such as fodder, medicines, etc., which are already claimed as deductible expenditure in the profit and loss account and there is no direct capital expenditure which can be attributed to give birth to the calves. Learned counsel contended that the entire expenses related to production of milk which has been shown as income from sale of milk and, therefore, the Tribunal has correctly concurred with the finding of the first appellate authority. It is highlighted by Mr. Nema that the tax effect in the instant case is less than Rs. 50,000 and as per the Central Board of Direct Taxes instructions dated October 28, 1992, the monetary limit for filling of appeal or reference before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Pradesh v. H. Abdul Bakshi and Bros . [1964] 15 STC 644, the apex court opined that business without profit is not business, any more than a pickle is candy. To regard an activity as business there must be a course of dealings, either actually continued or contemplated to be continued with a profit-motive and not for sport or pleasure. 14. Keeping the aforesaid concepts in view, it has to be scrutinised whether in the obtaining factual matrix calves form a part of stock. Certain conditions which emerge in the present case are that the assessee is engaged in the business of sale of milk and cows constitute an asset for production of milk; that the primary motive to have the cows is for production of milk; that the income is from sale of milk and all expenses and maintenance like fodder and medicines are designed to obtain milk; that the calves which have been sold are male and they cannot produce milk which is the business activity of the assessee. Two aspects are to be taken into consideration, namely, (1) the expenses made by the assessee to maintain the cows has already been put in the compartment of profit and loss account; and (2) the calves came into existence in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ging provision cannot be affected by the construction of a particular computation provision. If in the facts of a particular case, computation under section 48 is not possible, the charge under section 45 fails because it cannot be effectuated. 17. In Sunil Siddharthbhai v. CIT [1985]156 ITR 509, the apex court has expressed the opinion as under (head note): "At the time when the partner transfers his personal asset to the partnership firm, there can be no reckoning of the liabilities and losses which the firm may suffer in the years to come. All that lies within the womb of the future. It is impossible to conceive of evaluating the consideration acquired by the partner when he brings his personal asset into the partnership firm when neither can the date of dissolution or retirement be envisaged nor can there be any ascertainment of liabilities and prior charges which may not have even arisen yet. Therefore, the consideration which a partner acquires on making over his personal asset to the firm as his contribution to its capital cannot fall within the terms of section 48. And as that provision is fundamental to the computation machinery incorporated in the scheme re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lisation. In the case at hand, the entire expenses was attributable to the production of milk. The whole intention of the assessee is to produce milk and sell it and not to produce offsprings and sell them. In view of the aforesaid, we are inclined to agree with the view taken in the case of Sri Krishna Dairy and Agricultural Farm v. CIT [1988] 169 ITR 291 (AP). 20. In view of the aforesaid premises we are disposed to think that the Tribunal is right in holding that the sale of calves by the assessee cannot be regarded as capital gain since the cost of acquisition is not ascertainable. 21. The present appeal can also be looked from another aspect. It is not disputed that the tax effect is less than Rs. 50,000. The Central Board of Direct Taxes, vide instruction dated October 28, 1992, fixed the monetary limit for preferring appeal or reference before the High Court at Rs. 50,000. Later on that has been increased to Rs. 2 lakhs. In Asst. CIT v. Aradhana Oil Mills [2002] 30 ITC 446, it has been held that the Central Board of Direct Taxes circulars are binding on tax authorities and if the appeal involved anamount less than that fixed by the Central Board of Direct Taxe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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