JUDGMENT
1. The following question of law, arising out of the order of the Income-tax Appellate Tribunal for the assessment year 1978-79, has been referred to this court :
“Whether the Tribunal was right in holding that contribution of cut emeralds by the assessee in the partnership firm was transfer and liable to capital gains under Section 45 read with Section 2(47) of the Income-tax Act, 1961 ?”
2. The relevant facts in brief are that the assessee has indicated in his returns that he had declared cut emeralds under the Voluntary Disclosure of Income and Wealth Ordinance, 1975. These assets were said to have been acquired during the assessment years 1961-62 to 1970-71, The value of the same was shown at Rs. 35,330. The Commissioner of Income-tax, Jaipur, has granted a certificate under Section 8(2) of the said Act on August 10, 1977. Thereafter, these cut emeralds have been contributed as capital in the firm of Chordia Trading Corporation on October 25, 1976, for a sum of Rs. 61,240 and the assessee has claimed before the assessing authority that this is a capital contribution to the firm by the assessee. Even that has been credited in his capital account, But he claimed that no capital gains tax can be levied in view of the decision of the apex court in CIT v. Hind Construction Ltd. [1972] 83 ITR 211. The claim of the assessee was allowed to the extent that it is a capital contribution, but the Income-tax Officer has treated the transfer under Section 2(47) of the Income-tax Act, 1961, and charged capital gains tax. In appeal, the view taken by the Income-tax Officer has been confirmed by the Appellate Assistant Commissioner, vide its order dated August 14, 1981. Being aggrieved, the assessee has preferred an appeal before the Tribunal. After considering the case of the Karnataka High Court in Addl. CIT v. M.A J. Vasanaik [1979] 116 ITR 110 and the decision of the Gujarat High Court in the case of CIT v. Sunil Sidharthbhai [1981] 131 ITR 42, the Tribunal held that the capital contribution to the firm by the assessee is a transfer within the meaning of Section 2(47) of the Act and liable to capital gains tax.
3. On a reference, learned counsel for the assessee, Shri Ranka, has placed reliance on the decision of their Lordships of the Supreme Court on the case of Kartikeya V. Sarabhai v. CIT [1985] 156 ITR 509 and their Lordships have considered the issue whether the capital contribution is a transfer or not within the meaning of Section 2(47) of the Income-tax Act and answered it in the affirmative and held that the contribution of capital by a partner is a transfer and their Lordships further held that in that case, it is not taxable, it can be taxed only in a case where it is found that the firm is not genuine and a partner transferring his personal assets to the partnership firm does not represent a genuine intention to contribute to the share capital of the firm and the contribution is merely a device or ruse for converting the asset into money which would substantially remain available for his benefit without liability to tax on a capital gain.
4. Even up to the Tribunal the issue was not in dispute that the firm is not genuine or the capital has been contributed by the partner to reduce the tax and it is merely a device. The question was also put to learned counsel for the petitioner that when the issue has not been considered by the authorities below whether the firm is genuine or not and the contribution of the capital is merely a device to reduce the tax. He placed reliance on the decision of the Gujarat High Court in the case of Jaykrishna Harivallabhdas (HUF) v. CIT [1993] 202 ITR 175 and drew our attention specially to page 183 where a similar question was considered. It was found in that case that it was never the case of the Revenue that the contribution of capital was merely a device for reducing the tax and such a case was never put forward by the Revenue. Even there was no whisper of such a case where the Revenue assessed at any point of time and, therefore, there remains no occasion for us to permit any such enquiry in connection with the transaction in question.
5. From the perusal of the record, we also do not find any case of the Revenue that the contribution of capital is a mere device to reduce the tax or that the firm is not genuine. Even Shri Ranka, learned counsel for the petitioner, has submitted that the firm has been treated as a genuine firm and no doubt has been raised at any stage. No contrary fact has been brought to our knowledge by standing counsel. Considering these undisputed facts, we do not find any justification to remit the case back to the Tribunal on the issue to find out whether the firm is genuine or not or whether the capital contribution made by the assessee to its firm is merely a device to reduce the tax.
6. Therefore, following the decision of the apex court, we answer the question in favour of the assessee and against the Revenue. No order as to costs.