L MURUGAPPA CHETTIAR Vs. COMMISSIONER OF INCOME TAX MADRAS

JUDGEMENT

(1.) AT a partition of a Nattukottai Chettiar undivided family carrying of money-lending business at Kuala Lumpur in 1947, the sub-family, which is the assessee, was allotted for its share of the family properties 34 items of real property. Certain items of money-lending transactions and some outstandings were also allotted to the assessee. It is not in dispute that the items of real property so allotted had been acquired by the larger family in the course of its money-lending transactions and in the hands of that family had formed part of the stock-in-trade of the money-lending business.

(2.) DURING the account years relevant to the assessment years 1948-49, 1950-51 and 1952-53, the assessee sub-family sold some of the 34 items referred to above and some other properties which it had acquired in the course of its own money-lending transactions. Treating all these items of properties on the same footing, viz., as stock-in-trade of the assessee's money-lending business, the Income-tax Officer brought to tax the profits on the sales of these items during the above : said assessment years. In appeal, the Appellate Assistant Commissioner set aside these assessments, taking the view that those items of real property, which fell to the share of the assessee at the family partition, formed capital assets in its hands. The department appealed to the Tribunal. The Tribunal set aside the order of the Appellate Assistant Commissioner and restored the assessments. The Tribunal took the view that capital might also take the shape of stock-in-trade and that as these items of properties formed the stock-in-trade of the larger family and the divided members of that family continued to carry on the money lending business, those assets became the stock-in-trade of the business of the divided members.On the refusal of the Tribunal to state a case for the decision of this court, an application was made to this court under section 66(2) of the Income Tax Act, 1922. In the order directing the Tribunal to state a case, this court observed :

(3.) WHILE there is a clear enough finding of the Tribunal that it was a new business which was started by the assessee after the partition, there seems to be a vague suggestion in the latter part of the above extract that this business was in some manner or other connected with the earlier business carried on by the erstwhile undivided family. Except that all money-lending businesses are similar to one another, the Tribunal has not referred to any material either in the statement of the case or in its appellate order to show that any facts existed which made the latter business of the assessee part of the earlier business of the undivided family.We may mention here that the preceding parts of the statement of the case merely set out the manner in which the accounts were opened by the assessee in November, 1946, and entities relating to the various advances which were made by the assessee in the course of its money-lending business from March, 1948, onwards. The facts set out in the earlier paragraphs of the statement of the case give no indication of any mode of treatment of the disputed items of properties on the basis of which the Tribunal expressed its conclusion in the following terms in paragraph 22 :