- (1.) AT the instance of the assessee the Income-tax Appellate Tribunal, Delhi Bench 'c', referred the following question of law for our opinion under Section 256 (1) of the Income-tax Act, 1961: " Whether, on the facts and in the circumstances of the case and on a proper interpretation of Section 47 of the Income-tax Act, 1961, the Tribunal was right in holding that the sum of Rs. 30,000 could be correctly taxed as capital gain in the hands of the assessee ?"
(2.) THE dispute that has arisen in this reference relates to the assessment year 1965-66, corresponding to the previous year ending 31st March, 1965. The assessee is Ramanlal Khanna. He was the partner of M/s. Kohinoor Textile Printing Works, Bombay. The three other partners in this partnership were Brij Lal Khanna, Sharad Chand Khanna and Lajpat Rai Mehra. This partnership was dissolved under a deed of dissolution dated October 1, 1964. The assessee and the two other partners retired from the said firm. They received their respective shares on dissolution from the fourth partner who took over the entire partnership concern. On revaluation of the assets a credit of Rs. 30,000 was given to the assessee on October 1, 1964, being the share in the increase on the revaluation of the building and land, etc. , on the date of his retirement. This amount of Rs. 30,000 was treated as capital gain by the Income-tax Officer. The Appellate Assistant Commissioner, though agreeing with the decision in Bankey Lal Vaidya v. Commissioner of Income-tax, [1965] 551. T. R. 400 (All) all the same affirmed the decision of the Income-tax Officer. The assessee then preferred a second appeal to the Appellate Tribunal. The Tribunal rejected the appeal basing itself on the decision of the Supreme Court in James Anderson v. Commissioner of Income-tax, [1960] 39 I. T. R. 123; [1960] 3 S. C. R. 160 (S. C. ).
(3.) THE entire decision of this controversy depends on the true interpretation to be put on sections 45 and 47 of the Act. They are reproduced below for facility of reference: "45. Any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in sections 53 and 54, be chargeable to income-tax under the head ' capital gains ', and shall be deemed to be the income of the previous year in which the transfer took place. 47. Nothing contained in Section 45 shall apply to the following transfers: (i) any distribution of capital assets on the total or partial partition of a Hindu undivided family ; (ii) any distribution of capital assets on the dissolution of a firm, body of individuals or other association of persons; (iii) any transfer of a capital asset under a gift or will or an irrevocable trust: (iv) any transfer of a capital asset by a company to its subsidiary company, if (a) the parent company or its nominees hold the whole of the share capital of the subsidiary company, and (b) the subsidiary company is an Indian company;. . . . ";