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Km. Pr. Km. Firm Vs. Commissioner of Income-tax, Madras - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberTax Case No. 64 of 1963 (Ref. No. 17 of 1963)
Judge
Reported inAIR1967Mad331; [1966]62ITR159(Mad)
AppellantKm. Pr. Km. Firm
RespondentCommissioner of Income-tax, Madras
Excerpt:
- - it is well settled that when a members of a joint hindu family is allotted a share out of the joint property at a partition, he gets it as capital......the question referred to us terms on whether the properties in question were stock-in-trade of the money-lending business of the assessee or constituted capital. the matter relates to the assessment year 1957-58. the assessee is a firm carrying on money lending business in ceylon owning properties there. the number of the firm once formed a hindu undivided family, along with a certain person called sattappa. the family, as it is said, carried on a business in money-lending and properties. the properties were sold and profits were derived therefrom. but there was a partition on 12th april 1956, at which the business assets were divided as capital, but not by metes and bounds. the firm dealt with the properties in a separate account, and the transactions relating to those properties were.....
Judgment:

Veeraswami, J.

1. The question referred to us terms on whether the properties in question were stock-in-trade of the money-lending business of the assessee or constituted capital. The matter relates to the assessment year 1957-58. The assessee is a firm carrying on money lending business in Ceylon owning properties there. The number of the firm once formed a Hindu undivided family, along with a certain person called Sattappa. The family, as it is said, carried on a business in money-lending and properties. The properties were sold and profits were derived therefrom. But there was a partition on 12th April 1956, at which the business assets were divided as capital, but not by metes and bounds. The firm dealt with the properties in a separate account, and the transactions relating to those properties were all entered in that account. There was intermingling of the funds, but there was no purchase of properties. During the accounting year ended 31st March 1957, the assessee sold two gardens for a profit of Rs. 23,992. It is common ground that these properties had been acquired by the quondam joint family on 6th April 1916, and were allotted to the share of the partners of the firm at the partition.

(2) The revenue throughout, and Tribunal on these facts, considered that the properties constituted part of the stock-in-trade of the money lending business. On that view, the sum of Rs. 23,992 was included in the chargeable income.

(3) On a direction by this Court, the Tribunal has submitted the following question for our answer:-

'Whether, on the facts and in the circumstances of the case, the Tribunal had any material to hold that the properties were stock-in-trade of the money-lending business and notwithstanding the terms of the partnership deed and the accounts and the conduct of the parties.'

(4) It would have been quite sufficient if the question had stopped without the non obstinate clause. It is well settled that when a members of a joint Hindu family is allotted a share out of the joint property at a partition, he gets it as capital. It is, of course, open to him to bring it into the stock-in-trade. Whether he does it or not will depend upon the facts and circumstances in each case, particularly the treatment accorded to such property to as to invest it with the character of stock-in-trade. This accept of the question was considered in Tax Case No. 159 of : AIR1967Mad328 .

(5) The facts in this case are not sufficient in our view, to hold that what was obtained as capital at the partition was given such treatment as to invest it with the character of stock-in-trade of the money lending business. The properties were dealt with in a separate account and the transactions in respect of them were all brought into the account. There were no purchasers. Though there was said to be intermingling of funds, that in itself will not be sufficient to invest the capital with the character to stock-in-trade. We answer the question in favour of the assessee with costs. Counsel's fee Rs. 250.

(6) Reference answered.


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