TMI Blog1986 (4) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... question into a capital asset within the meaning of section 2(14) of the Income-tax Act with effect from a date prior to May 2, 1970 ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the transfer of the asset in question by the assessee on May 1, 1970, did not give rise to any surplus assessable under the head 'Capital gains'? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the valuation of the land in question (namely, non-cash capital contributed by the assessee) in the firm's books at a figure higher than the price for which it was originally purchased by the assessee did not give rise to any receipt assessable u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Income-tax Officer completed the assessment on a total income of Rs. 38,549 as against returned income of Rs. 32,505. On an examination of the record of the assessment, the Commissioner of Income-tax considered the aforesaid findings of the Income-tax Officer to be prejudicial to the interests of the Revenue and to that extent erroneous. He therefore, initiated proceedings under section 263 of the Act and issued a notice to the assessee to show cause why the Income-tax Officer should not be directed to revise the assessment order after including capital gains arising out of the transfer of her share to the partnership firm, M/s. Mamta Pratiksha Corporation, in her total income. The assessee appeared in response to this notice and op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax Officer and directed the Income-tax Officer to make a fresh assessment in the light of the findings recorded by him. Being aggrieved by the order passed by the Commissioner, the assessee carried the matter in appeal before the Tribunal. The Tribunal held that the notification dated February 6, 1973 on which reliance was placed by the Commissioner did not have retrospective effect from any date prior to May 2, 1970. It further held that contribution by the assessee of her share in the capital of the partnership firm amounted to transfer within the meaning of section 2(47) of the Act, but since no consideration flowed from the partnership firm to the assessee for such transfer on May 1, 1970, there was no scope of any surplus under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 2(47) of the Act. The Tribunal, however, held that no consideration at all from the partnership firm flowed to the assessee and, therefore, there was no scope of any surplus arising under the head " Capital gains ". Question No. 4, it would appear, only partly covers the controversy and that question is already answered by the Tribunal in favour of the Revenue. We think that what was intended to be referred to us for our opinion was whether the Tribunal was right in holding that as no consideration flowed from the partnership firm to the assessee, there was no scope of any surplus arising under the head " Capital gains ". There re, in order to bring out the real controversy in issue, we reframe question No. 4 as follows : " Whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess and it is not disputed that the aforesaid difference did not arise on account of any business done by the partnership. It was not the assessee's business to make such contributions to partnership firms or become partner in various firms by making such contributions and, therefore, we fail to see how the aforesaid difference could be treated as " business income " or " profits and gains of business " of the assessee. In fact, no income is derived by the assessee by valuation of her share in the land in the books of the firm. What is valued is the capital contribution made by the assessee in the partnership firm and by no stretch of imagination could the difference between the value of capital contribution in the books of the firm and the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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