NAVINCHANDRA MAFATLAL BOMBAY Vs. COMMISSIONER OF INCOME TAX BOMBAY CITY

JUDGEMENT

(1.) This appeal is directed against the judgment pronounced on the 7th September 1931, by the High Court of Judicature at Bombay on a reference made at the instance of the appellant under Section 66(1) of the Indian Income-tax Act, 1922. By an assessment order dated the 31st March 1948 the appellant was assessed by the Income-tax Officer, Bombay, for the assessment year, 1947-1948 on a total income of Rs. 19,66,782 including a sum of Rs. 9,38,011 representing capital gains assessed in the hands of the appellant under Section 12-B of the Act. The said amount of capital gains was earned by the appellant in the following circumstances. The assessee had a half share in certain immovable properties situated in Bombay which were sold by the assessee and his co-owners during the relevant accounting year which was the calendar year ending on the 31st December 1946 to a private limited company known as Mafatlal Gagalbhai. and Company Ltd. The profit on the sale of the said properties amounted to Rs. 18,76,023 and the appellant's half share therein came to the sum of Rs. 9,38,011 which was included in the assessment under Section 12-B.

(2.) In April 1948 the appellant appealed from the said order to the Appellate Assistant Commissioner contending that Section 12-B of the Act authorising the levy of tax on capital gains was 'ultra vires' the Central Legislature, The Appellate Assistant Commissioner by his order dated the 5th April 1949 dismissed the appeal. A further appeal to the Income-tax Appellate Tribunal was dismissed by its order dated the 30th June 1950.

(3.) Being aggrieved by the order of the Appellate Tribunal the appellant applied to it under Section 66(1) of the Act for raising certain questions of law. The Appellate Tribunal agreeing that certain questions of law did arise out of its order drew up a statement of the case which was agreed to by the parties and referred to the High Court the following questions: