JAGADISAN J. - One Kadiresan Chettiar and another Arunachalam Chettiar were partners in a money-lending business which they carried on at Ceylon. Kadiresan Chettiar died on 29th May, 1935, and the partnership became dissolved. In the course of that money-lending business, an estate called Girivalai Estate of an extent of about 276 acres was purchased and it is not in dispute that this estate was a stock-in-trade of the money-lending business at the time of the acquisition. The estate was purchased some time in the year 1931 for a sum of Rs. 1,30,180. At the time of Kadiresan Chettiars death his only son, the assessee now before us was a minor aged about 9 years. On dissolution of the firm, this estate was allotted to the share of the assessee. He attained age in March, 1947 and he had been assessed to tax on his income. In the assessment proceedings it was not disputed that the properties acquired by the partnership represented stock-in-trade of the business. In the accounting year ended on March 31, 1956, that is, in the assessment year 1956-57, the assessee sold 54 acres out of the total of 276 acres of Girivalai Estate for Rs. 1,54,750. The Income-tax Officer calculated the cost price of the estate purchased in 1930-31 at Rs. 1,30,180 and took the view that the excess of Rs. 22,570 was revenue receipt which could be brought to tax. The assessee preferred an appeal to the Appellate Assistant Commissioner. His contention was that the Income-tax officer went wrong in fixing the cost of the estate at Rs. 1,30,180 and that the actual cost should be computed as Rs. 1,63,736.30. On this basis he urged that there was a loss of Rs. 8,936. As there were no materials available for the authority to determine whether the contention raised by the assessee was correct or not, he remanded the matter for fresh consideration by the Income-tax officer. The Income-tax Officer held after the remand that the assessees contention that the cost should be fixed at Rs. 1,89,292 was correct. But he was further of the view that as only 54 acres out of the total of 276 acres were sold, if the proportionate cost had been worked out, the actual profit would come to Rs. 1,32,776. In order to assess the correct profits, the Appellate Assistant Commissioner gave notice of enhancement to the assessee and heard the appellants representative. At that stage the only objection that was raised by him was that the question of determination of the profit cannot arise in the year of account, and that it would arise only after the entire estate is sold or disposed of. this contention was, however, negatived by the Appellate Assistant Commissioner, following the decision of this court (not reported) in VR. KR. S. Firm Kuala Kangsar v. Commissioner of Income-tax (C.M.P. No. 8125 of 1953 [See Appendix infra page 56.]).
The assessee preferred an appeal against this decision to the Tribunal and for the first time raised a contention that the excess realisation was not a revenue receipt chargeable to tax but was really a capital accretion. This contention was based on the ground that the properties were really in the nature of capital investment made by the quondam money-lending firm, and that the sale of capital asset realising more income than what was invested would be a capital accretion and not a revenue receipt. This ground was not taken even in the memorandum of grounds of appeal to the Tribunal, but, as stated already, it was raised at the time of hearing of the appeal before the Tribunal. The Tribunal held that it was not open to the assessee to raise the point for the first time, because the ground had not been raised earlier and that the ground, if permitted to be raised, would not merely require an investigation of further facts but also would amount to permitting the assessee to set up a case in conflict with the stand taken by him in the course of the assessment proceedings. In this view of the matter, the Tribunal declined permission to the assessee to raise that ground. The other question raised before the Tribunal, namely, that profits should not be computed till the entire estate is disposed of, was also negatived by the Tribunal, following the decision of this court already referred to. It is against this order the assessee camp up to this court in reference under section 66(2) and this court directed the Tribunal to refer the following question :
'1. Whether on the facts and in the circumstances of the case the Tribunal was justified in refusing to admit the additional grounds of appeal ?
2. Whether the computation of the profits with reference to the sale of a portion of the properties was justified in law ?'
It is quite clear that the assessees contention that the receipt was of a capital nature was raised only for the first time before the Tribunal. It is no doubt open to the Tribunal to permit the assessee to raise the contention, though it might involve an investigation of fresh facts under rule 12 of the Income-tax Appellate Tribunal Rules. The question is one of discretion to be exercised by the Tribunal on the facts and circumstances of each case. We are unable to say that, having regard to the facts and circumstances of this case, the Tribunal in any way exercised its discretion illegally or improperly in declining permission to the assessee to raise the point. Mr. Ramamani, the learned counsel for the assessee, contends that there can be no estoppel or any other legal bar to the assessee raising the point, as he must have been under a bona fide misapprehension that what was originally stock-in-trade during the subsistence of the firm continued that character despite the fact that the money-lending business itself ceased and despite also the fact what all the assessee did was to realise the assets of the previous firm. But these are questions of fact upon which there are no materials to enable us to reach any conclusion either way. It might be that the assessees guardian or 'administrator' carried on money-lending business during the minority of the assessee and employed the stock-in-trade of the previous business as stock-in-trade of the fresh business or it might be equally the other way. The only question before us is whether the Tribunal was right in refusing permission to the assessee to raise the point before it. The matter is purely one of discretion and there are no materials to hold that it was not properly exercised. In this view of the matter, question No. 1 is answered against the assessee.
It is conceded by the learned counsel for the assessee that in regard to question No. 2, the matter is entirely covered by the decision of this court in VR. KR. S. Firm Kuala Kangsar v. Commissioner of Income-tax (C.M.P. No. 8125 of 1953 (see Appendix below). This question is also answered against the assessee. The assessee will pay the costs of the department. Counsels fee Rs. 250.