vil Appeal Nos
1905 06 NT of 1974 and 3414 of 1984
From the Judgment and Order dated 24773 and 7981 of the Bombay High Court in ITR No 19 of 1967 66 of 1964 and 27 of 1972 respectively
B Datta Additional Solicitor General MB Rao and Ms A Subhashini for the Appellant
Soli J Sorabji Harish Salve Mrs AK Verma and Jeel Peres for the Respondents
The Judgment of the Court was delivered by PATHAK CJ
The assessee is a Hindu Undivided Family deriving income from interest on securities dividends property and dealing in shares
In 1941 the assessee pur chased a share of the Shorrock Spinning and Manufacturing Co Ltd hereinafter referred to as 181 the Shorrock Co of the face value of Rs 1000 for Rs3307
Later this share was split into 10 shares of Rs 100 each and from time to time a total of 80 shares of the face value of Rs 100 each was issued to the assessee by way of bonus shares
In consequence on 31 December 1959 the assessee owned 90 shares in the Shorrock Co of the face value of Rs 100 each
There is another company called the New Shorrock Spin ning and Manufacturing Co Ltd to which reference may be made as the New Shorrock Co
It was decided to amalgamate the Shorrock Co with the New Shorrock Co and upon peti tions filed under section 39 1 and section 394 of the the Gujarat High Court made an order dated 23 Septem ber 1960 directing meetings of the share holders of both the companies
The meetings were held on 27 October 1960 and the scheme of amalgamation was approved
On 25 November 1960 the High Court sanctioned the scheme of amalgamation and declared that the scheme would be binding on members of both the Companies
Under the scheme of amalgamation the undertaking and all the property rights and powers as well as all liabili ties and duties of the Shorrock Co were to stand trans ferred and vest with effect from 1 January 1960 in the New Shorrock Co The scheme of amalgamation provided further for an increase in the share capital of the New Shorrock Co and it permitted the creation of 14625 new ordinary shares of the face value of Rs 125 each of the transferee company
The newly created shares were to rank pari passu with the existing shares of the transferee company in all respects
Under the scheme the New Shorrock Co as the transferee company was directed to allot to members of the Shorrock Co the transferor company one share in the transferee company for every two shares of the transferor company held by them
The order of the Court directed that the Shorrock Co should file a certified copy of the order with the Registrar of Companies within 14 days for registration and on such certified copy being delivered the transferor compa ny would stand dissolved and the Registrar of Companies was to place all documents relating to the transferor company on the file relating to the transferee company and the folios relating to the two companies were to be consolidated ac cordingly
During the assessment proceedings for the assessment year 1961 62 the previous year being the financial year ended 31 March 1961 the Income Tax Officer although apprised of the fact of the scheme of amalgamation and of the acquisition by the assessee of 45 shares of the 182 New Shorrock Co omitted to consider the applicability of section 12B of the Indian Income Tax Act 1922
On 21 January 1964 the Commissioner of Income tax issued a notice under section 33B of the Act to the assessee stating that the receipt of 45 shares of the New Shorrock Co in exchange of his original holding of 90 shares in the Shorrock Co in December 1960 had resulted in an assessable profit and this aspect had been overlooked by the Income Tax Officer when making the regular assessment and therefore he proposed a revision of the assessment
After heating the assessee the Commis sioner of Income Tax passed an order dated 29 January 1964 directing the Income Tax Officer to revise the assessment and to include an amount of Rs49350 representing the capital gain resulting from the transaction of the acquisi tion of 45 shares of New Shorrock Co in place of the 90 shares held in Shorrock Co On appeal by the assessee before the Income Tax Appellate Tribunal the Appellate Tribunal held that the transaction represented neither an exchange nor a relinquishment and therefore section 12B of the Act was not attracted
At the instance of the Revenue the Appel late Tribunal referred the following questions to the High Court for its opinion 1
Whether on the facts and in the circumstances of the case the sum of Rs49350 could be assessed in the hands of the assessee as capital gains as having ac crued to the assessee by exchange or relin quishment as provided for under section 12B of the Act 2
If the answer to the above question is in the affirmative whether the said sum of Rs49350 was assessable in the year 1961 62 Before the High Court the Revenue did not contend that the transaction constituted a sale or a transfer and the parties confined themselves to the point whether the trans action represented an exchange or a relinquishment for the purposes of section 12B The High Court took the view that no exchange can be said to have taken place on the allotment of the 45 shares of the New Shorrock Co under the scheme of amalgamation
Nor in the opinion of the High Court did it constitute a relinquishment
In the result the High Court answered both questions in favour of the assessee and against the Revenue
The relevant portion of section 12B of the Act provides 183 section 12B1 Capital gains
The tax shall be payable by an assessee under the head Capital gains in respect of any profits or gains arising from the sale exchange relinquish ment or transfer of a capital asset effected after the 31st day of March 1956 and such profits and gains shall be deemed to be income of the previous year in which the sale ex change relinquishment or transfer took place
The sole question is whether the receipt of the 45 shares of the New Shorrock Co upon amalgamation by reason of the share holding of 90 shares of the Shorrock Co can be described as an exchange or a relinquishment within the meaning of section 12B of the Act
It seems plain to us that no exchange is involved in the transaction
An exchange in volves the transfer of property by one person to another and reciprocally the transfer of property by that other to the first person
There must be a mutual transfer of ownership of one thing for the ownership of another
In the present case the assessee cannot be said to have transferred any property to any one
When he was allotted the shares of the New Shorrock Co he was entitled to such allotment because of his holding the 90 shares of Shorrock Co The holding of the 90 shares in the Shorrock Co was merely a qualifying condition entitling the assessee to the allotment of the 45 shares of the New Shorrock Co The dissolution of the Shor rock Co deprived the holding of the 90 shares of that company of all value
On the question whether there was any relinquishment the decision must again be against the Revenue
A relin quishment takes place when the owner withdraws himself from the property and abandons his rights thereto
It presumes that the property continues to exist after the relinquish ment
Upon amalgamation the shares of the Shorrock Co as has been mentioned earlier lost all value as that company stood dissolved
There is no relinquishment
The connected cases raise similar questions and are dealt with accordingly
In the result we agree with the view taken by the High Court and dismiss these appeals with costs
HLC Appeals dis missed


Summary:
Sub section
1 of section 25 of the Wealth Tax Act 1957 inves t ing the Commissioner with the power to revise an ord er passed by any authority subordinate to him stipulates in c l b of the proviso thereto that the power of revision sha ll not extend to an order which is the subject of an appe al before the Appellate Assistant Commissioner or the Appella te Tribunal
The respondent a share holder in a company adopte d for the purpose of assessment under the Act valuation of shares at their breakup values with paid up capital a nd reserves which was rejected by the Wealth Tax Officer w ho estimated their value on the basis of capitalisation of profits for the assessment year 1960 61 and on the basis of the break up value with certain modifications for the a s sessment years 1958 59 and 1959 60
The respondent s appea ls were partly allowed by the Appellate Assistant Commission er against which the Commissioner of Wealth Tax preferr ed appeals to the Appellate Tribunal
The Appellate Tribun al dismissed the appeals
During the pendency of the appea ls before the Tribunal the respondent preferred revisi on applications to the Commissioner of Wealth Tax and contend ed that the valuation of the shares adopted by the Appella te Assistant Commissioner was unreasonable and excessive a nd should be duly modified
The Commissioner rejected t he applications on the ground that they were incompetent in view of cl
b of the proviso to sub section
1 of section 2 5
Against that order the respondent filed a writ petiti on which was allowed by a Single Judge of the High court hol d ing that the revision applications were competent since t he aforesaid provision would not operate as a bar against an assessee in a case where the appeal before the Appella te Tribunal is filed by the Revenue
An appeal filed again st his order was 132 dismissed by a Division Bench of the High Court
Allowing the appeal HELD Where an appeal is filed before the Appella te Tribunal against an order of the Appellate Assistant Commi s sioner the impugned order merges in the order of the Appe l late Tribunal when the appeal is disposed of on merits
If meanwhile a revision application has been filed before t he Commissioner against the same order of the Appellate Assis t ant Commissioner it will not be open to the Commissioner to pass any order in revision against the order of the Appe l late Assistant Commissioner as the latter will have merg ed with the order of the Appellate Tribunal
It is immateri al that the appeal and the revision application have not be en filed by the same party
This would be plainly so as in t he present case the subject matter of the appeal before t he Appellate Tribunal is the same as that of the revisi on application before the Commissioner
135B D In this case the High Court omitted to consider that t he appeals filed before the Tribunal had been disposed of a nd the impugned order of the Appellate Assistant Commission er had merged in the order of the Appellate Tribunal renderi ng the revision applications infructuous
What the responde nt should have done was to file her own appeals before t he Appellate Tribunal
It must be noted that the Appella te Tribunal is a superior body to the Commissioner as is cle ar from sub section
1 of section 26 which provides that an appeal sha ll lie to the Appellate Tribunal from an order under sub section
 2 of section 25 of the Commissioner
There would have been no difficulty in the Appellate Tribunal considering the appea ls of both parties and passing suitable orders in regard to t he valuation of the shares
135F G 136A B