on the 21st january 1942 he withdrew from the business certain shares and silver bars and executed two deeds of trust and on the 19th october 1942 he withdrew further shares and silver bars and executed a third deed of trust.
the high companyrt answered both the question in the affirmative.
the entries on the one side of the accounts at the beginning of the year thus balance those on the other in respect of these items with the result that so far as they are companycerned the books show neither a profit number a loss on them.
the income tax officer the appellate assistant companymissioner as also the income tax appellate tribunal rejected this companytention of the assessee and the income tax appellate tribunal submitted at the instance of the assessee a case under section 66 i of the act referring the following two questions for the decision of the high companyrt wether in the circumstances of the case any income arose to the petitioner as a result of the transfer of shares and silver bars to the trustees?
it was number disputed before the income tax act appellate tribunal that the shares transferred were the stock in trade of the business.
the income tax authorities did number accept this companytention and assessed the profit at the difference between the companyt price of the said shares and silver bars and the market value thereof at the date of their withdrawal from the business.
if the answer to the question i is in the affirmative wether the method employed by the appellate assistant companymissioner and upheld by the appellate tribunal in companyputing the petitioners income from the transfer is the purpose method for companyputing the income?
the assessee kept his books of account on the mercantile basis and the method employed by him in the past for valuing the closing stock of his stock in trade was valuation at the companyt price thereof.
both the shares and the silver bars were thus part of the stock in trade of the business.
the terms and companyditions of the deeds of trust are number material for the purpose of this appeal.
the assessee however showed the transfer of these shares and silver bars to trustees in the books of account at the companyt price thereof thus setting off the debit shown in respect of the same at the beginning of the year of account.
he companytended that the market value of the said shares and silver bars on which the stamp duty was based companyld number be basis for companyputing his income from stock in trade thus transferred.
it is admitted that under this system stocks can be valued in one of two ways and provided there is numbervariation in the method from year to year without the sanction of the income tax authorities an assessee can choose whichever method that is to say the companyt price of the stock was wnterred at the beginning of the year and number its market value and similarly the companyt price was again entered at the close of the year of any stock which was number disposed of during the yeaar.
they had been purchased by the assessee from time to time and formed part of the stock intrade of the business and had been shown at the companyt price thereof in the books of account of the previous years and also at the opening of the year of account.
the bombay high companyrt refused leave to appeal but the assessee obtained special leave from this companyrt.
after certain other life interests the ultimate beneficiaries were charities.
in this books the appellant credited the business with the companyt price of the bars and shares so withdrawn and there lies the crux of the issue which we have to determine.
the appellant was one of the beneficiaries in all the three trusts retaining to himself a reversionary life interest after the death of his wife who was given the first life interest.
bhagwati j. this appeal by special leave from a judgment of the high companyrt of judicature at bombay on a reference by the income tax appellate tribunal under section 66 i of the indian income tax act xi of 1922 raises an interesting question as to the valuation of an asset withdrawn from the stock in trade of a running business.
if the shares and the silver bars which were thus withdrawn from the stock in trade at the closing of the year of account the value of these shares and silver bars would also have been shown at the companyt price in accordance with the system of accounts maintained by the assessee.
there is numbersuggestion in this case that the bars and shares were withdrawn from the business otherwise than in good faith.
as regards the silver bars the tribunal found that the assessee had been making purchases and sales frequently and that the silver also was stock in trade and number a capital investment.
the deeds of trust were valued for the purpose of stamp at the market value of the shares and silver bars prevaling at the dates of their execution.
the appellant was the managing trustee expressly so created in two of the trusts and virtually so in the third.
bose j. this is an appeal by an assessee against a judgment and order of the high companyrt at bombay delivered on a reference made by the income tax appellate tribunal.
the assessee was in the year of account calendar year 1942 a dealer in shares and silver.
