- (1.) THE Income-tax Appellate Tribunal, vide its order dated December 7, 1983, has referred the following question of law arising out of the Tribunal's order dated March 14, 1983, under Section 256(1) of the Income-tax Act, 1961, in respect of the assessment year 1978-79 : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that precious stones declared under the Voluntary Disclosure Scheme, 1975, were not a capital asset and no capital gain arose to the assessee in view of exception provided by Section 2(14)(i) of the Income-tax Act, 1961 ? "
(2.) THE facts of the case are that the assessee made a disclosure of his concealed income in the form of precious stones under the Voluntary Disclosure Scheme, 1975, and that part of the precious stones out of the stock disclosed worth Rs. 21,168 and Rs. 1,272 had been contributed towards capital on November 10, 1977, relevant to the assessment year 1978-79 in the firm, Jus Gems, on the market value. Thus, against the book value of the stock of Rs. 21,168 and Rs. 1,272, the market value was taken at Rs. 58,800 and Rs. 2,534, respectively, at the time of contribution and the assessee's capital account was credited by these two amounts aggregating to Rs. 61,344. THE Income-tax Officer, A-Ward, Jaipur, while finalising the assessment said that the amount declared in the disclosure had already been accounted for in the assessment year 1977-78. It has not been established as to whether the assessee had any amount surplus from the disclosure to be introduced this year. It was found that the assessee had introduced the capital declared in the disclosure capital of Rs. 49,950 and goods contributed as capital of Rs. 28,992 and disclosure capital in Dhadda and Co. of Rs. 23,999. THE Income-tax Officer, therefore, observed that these disclosures have already been accounted for in the assessment year 1977-78. THE amount was assessed as income from other sources. In the appeal before the Commissioner of Income-tax, the assessment was set aside and the Income-tax Officer was directed to compute the income taking into consideration certain statements and stock as alleged by the petitioner. The assessee preferred a second appeal before the Income-tax Appellate Tribunal and the said Tribunal found that there is no transfer of capital assets within the meaning of Section 45 and the case of the assessee is covered by exclusion Sub-clause (i) of Clause (14) of Section 2 and no capital gain arises. It was also observed that the assessee has filed copies of the assessment orders from 1962-63 to 1966-67 from which it is evident that he was in possession of the precious stones representing his stock-in-trade for which the disclosure was made and which were contributed towards capital by the assessee in the firm, Jus Gems, in the assessment years 1977-78 and 1978-79. The Tribunal has also taken into consideration that the assessee was a dealer of the precious stones and he made the disclosure, and out of the stock so disclosed he made the contribution of some of the stock-in-trade. The stock so disclosed represented the stock which was contributed in the firm, Jus Gems. Learned counsel for the respondents relied upon the decision given by this court in the case of Rajmal Chordia v. CIT [1995] 215 ITR 52, where in the similar circumstances, it was held by this court that where some cut-emeralds were contributed as capital in a firm by the assessee and no capital gain tax could be levied on it, it was observed that it has not been found that the firm is not genuine, or that the transfer of assets to the firm by a partner does not represent genuine intention to contribute the share capital of the firm or capital has been contributed by the partner to reduce the tax and is merely a device. Under Section 2(14)(i) "capital asset" means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include (i) any stock-in-trade, consumable stores or raw materials held for the purpose of his business or profession, Following the decision given in the case of Rajmai Chordia [1995] 215 ITR 52 (Raj), we are of the opinion that the Tribunal was justified in holding that precious stones declared under the Voluntary Disclosure Scheme, 1975, were not capital assets and no capital gain arose to the assessee in view of the exception provided by Section 2(14)(i) of the Income-tax Act, 1961. Consequently, the reference is answered in favour of the assessee. and against the Revenue. ;