COMMISSIONER OF INCOME-TAX vs. KAPILAGAURI S PATEL

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ITR/32/1991HC GujaratGJHC24013269199107 August 2003Author: HONOURABLE MR. JUSTICE D.H.WAGHELA,HONOURABLE MR. JUSTICE D.A.MEHTA3 pages
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What did the High Court hold?

The High Court answered all three referred questions in the affirmative, in favour of the assessee and against the Revenue. The Court's decision was based on its prior judgment rendered on the same date in the case of Commissioner of Income-tax Vs. Shri Subodhchandra Shantilal Patel (ITR 27 of 1991), which involved identical facts and circumstances. Consequently, the Tribunal was justified in entertaining the assessee's miscellaneous application and quashing the Commissioner (Appeals)'s order. The Tribunal was also correct in holding that there were no capital gains arising from the transaction in question. Furthermore, even with the prior finding of no genuine conversion of shares and debentures into stock-in-trade, the Tribunal was within its rights to entertain the assessee's claim that the transfer did not result in taxable capital gains. The reference was disposed of accordingly.

What were the facts?

The Income Tax Reference No. 32 of 1991 was filed by the Revenue against the assessee, Kapilagauri S. Patel, concerning assessment year 1982-83 (Samvat year 2037). The reference was made at the instance of the Revenue, with three questions of law referred by the Income-tax Appellate Tribunal, Ahmedabad Bench "A" for the opinion of the High Court. The judgment notes that the facts and circumstances of this case are identical to those in Income-tax Reference No. 27/1991, Commissioner of Income-tax Vs. Shri Subodhchandra Shantilal Patel. Therefore, the detailed facts of the controversy were not reiterated in this judgment.

What were the issues?

The Tribunal had to decide three questions referred by the Revenue: 1. Whether, in law and on facts, the Appellate Tribunal was justified in entertaining a miscellaneous application filed by the assessee and allowing it by quashing the order of the Commissioner (Appeals) by holding that the transaction did not result in taxable capital gains? 2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that there was no capital gains in the transaction in question? 3. Whether, when the Tribunal had previously held under an order dated 27-11-1986 that there was no genuine conversion of shares and debentures into stock-in-trade before transferring them into a partnership firm, the Tribunal was right in law in entertaining the assessee's claim that the transfer did not result in taxable capital gains? The Revenue initiated the reference. The judgment does not explicitly record arguments made by either the assessee or the Revenue regarding these questions, but implies the questions were raised by the Revenue for the High Court's opinion.

Which sections of the Income-tax Act were involved?

Section 256(2)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 32 of 1991

Hon'ble MR.JUSTICE D.H.WAGHELA

and Hon'ble MR.JUSTICE D.A.MEHTA

============================================================ 1. Whether Reporters of Local Papers may be allowed : NO to see the judgements?

2.

To be referred to the Reporter or not? : NO 3. Whether Their Lordships wish to see the fair copy : NO of the judgement?

4.

Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

5.

Whether it is to be circulated to the concerned : NO Magistrate/Magistrates,Judge/Judges,Tribunal/Tribunals?

-------------------------------------------------------------- COMMISSIONER OF INCOME-TAX Versus KAPILAGAURI S PATEL -------------------------------------------------------------- Appearance: MR MANISH R BHATT for Petitioner No. 1 MR MANISH J. SHAH for Respondent No. 1

--------------------------------------------------------------

CORAM : MR.JUSTICE D.H.WAGHELA and MR.JUSTICE D.A.MEHTA

Date of decision: 07/08/2003

ORAL JUDGEMENT (Per : MR.JUSTICE D.H.WAGHELA)

1.

This Reference under section 256(2) of the Income-tax Act, 1961 (the Act), is at the instance of the Revenue and the following three questions have been referred by the Income-tax Appellate Tribunal, Ahmedabad Bench "A" for our opinion:

"

1.

Whether, in law and on facts, the Appellate Tribunal was justified in entertaining miscellaneous application filed by the assessee and allowing the same by quashing the order of the Commissioner (Appeals) by holding that the transaction did not result in taxable capital gains?

2.

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that there was no capital gains in the transaction in question?

3.

Whether, when the Tribunal held under order dtd: 27-11-1986 that there was no genuine conversion of the shares and debentures into stock in trade before transferring the same into partnership firm, the Tribunal was right in law in entertaining the claim of the assessee that the transfer did not result into taxable capital gains?"

The Assessment year is 1982-83 and the corresponding period is Samvat year 2037. 2. It is common ground between the parties that the facts and circumstances are identical to those obtaining in Income-tax Reference No.27/1991 in the case of The Commissioner of Income-tax Vs. Shri Subodhchandra Shantilal Patel, and hence it is not necessary to set out the facts in controversy in detail.

3.

Hence, for the reasons stated in our decision rendered today in the case of The Commissioner of Income-tax Vs. Shri Subodhchandra Shantilal Patel, in ITR 27 of 1991, the three questions referred to us are answered as follows:

Question No.1 in the affirmative i.e. in favour of the assessee and against the revenue, question no.2 in the affirmative i.e. in favour of the assessee and against the revenue, and question no.3 in the affirmative i.e. in favour of the assessee and against the revenue.

4.

The reference stands disposed of accordingly. There shall be no order as to costs.

[D.H. WAGHELA J.]

[D.A. MEHTA J.] *ar*

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