TMI Blog1954 (10) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... to refer to it are comprehensive enough to embrace the issue of law that, in our opinion, arises out of the order of the Tribunal. But we think that it would clarify the position if these two questions were re-stated in the following form :-- " Whether the finding of the Tribunal is not vitiated by reason of its having relied upon suspicions and surmises not supported by any evidence on the record or upon partly inadmissible material ? " Allow this appeal, set aside the order of the High Court dismissing the application of the appellant under Section 66(2) of the Indian Income-tax Act, and remand the case to the High Court - C.A. 246 OF 1953 - - - Dated:- 25-10-1954 - Judge(s) : GHULAM HASAN., MEHR CHAND MAHAJAN., N. H. BHAGWATI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total assets. On the death of Girdharlal, his three sons and his widow clearly became entitled to the amount that stood to his credit in the firm Girdharlal Trikamlal Co. and by an arrangement made after his death the Hindu undivided family got in July, 1942, shares of the value of Rs. 18,34,586 from the firm towards payment of its liability to the Hindu undivided family as part of the inheritance of Girdharlal and for the balance the Hindu undivided family was shown as creditor of the new firm. The shares that were handed over were valued at the market price. The Hindu undivided family thus in its status as such became the owner of those shares. It is common ground that the family in that status antecedent to that date was not doing any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res are by way of change in investment and not business dealings. Hence the profit is capital accretion and not business profit. Thus the same is not liable to assessment. " The Commissioner of Income-tax preferred an appeal against this order and with success. The Tribunal by its order dated the 1st August, 1951, allowed the appeal and restored the order of the Income-tax Officer. It held that the transfer of shares of the value of Rs. 18,34,586 by the new firm to the Hindu undivided family was a device to evade income-tax. After examining the purchases and sales of shares by the Hindu undivided family during the years 1942,1943, 1944 and 1945, the Tribunal came to the conclusion that the moving spirit in the new firm being Dhirajlal wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Hindu undivided family carried on business in respect of the shares transferred to it by the firm and in the shares purchased by it, is a question of fact and that no question of law arose out of the findings of the Tribunal and that from the very start the intention of Dhirajlal both as a transferor and transferee was to deal in these shares. Dissatisfied with the order of the Tribunal, the appellant made an application to the High Court under Section 66(2) for a direction to the Tribunal to state a case and to refer to it the following questions of law :-- 1. Whether on the facts and circumstances of the case the assessee was doing business in shares in the account year ; or, 2. Whether there is any material on record on the basi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and if sales had been effected, the profits would have been liable to tax. The very fact that shares were transferred, and that also a substantial holding of the firm, indicates conclusively that the object of the transfer was to evade income-tax, if possible. The Hindu undivided family, it strikes us did not take the shares as the return of its capital. The Hindu undivided family knew, when the shares were transferred, what the object underlying the transfer was. If these shares had remained with the Hindu undivided family for a considerable time, one might very well accept the proposition that the Hindu undivided family took the shares as the return of its capital. The Hindu undivided family, however, did not keep the shares for a very lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al and thereby an issue of law arises. For the reasons given above we are of the opinion that both the Tribunal and the High Court were in error in the view that no issue of law arose in the case and that the Tribunal could not be called upon to state a case and to refer to the High Court any issue of law. The two questions framed by the appellant and which he wanted the High Court to ask the Tribunal to refer to it are comprehensive enough to embrace the issue of law that, in our opinion, arises out of the order of the Tribunal. But we think that it would clarify the position if these two questions were re-stated in the following form :-- " Whether the finding of the Tribunal is not vitiated by reason of its having relied upon suspic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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