Judgement

RAMASWAMI, J. :- This appeal is brought by certificate from the judgment of the Bombay High Court dated the 22nd February, 1965 in Income-tax Reference No. 2 of 1962.

2. In the year 1951 the assessee Maneklal Ujamshi (hereinafter referred to as the assessee made a gift of 1184 ordinary and 155 preference shares in Changdeo Sugar Mills Ltd. to his wife Bai Laxmibai. The total value of these transferred shares on the date of the transfer was Rs. 69,730. Subsequent to the transfer the company converted the preference shares into ordinary shares giving the shareholders 8 ordinary shares for each preference share with the result that on December 31, 1954, Bai Laxmibai held in all 2,424 ordinary shares of the mills. Out of these 2,424 shares, Bai Laxmibai sold 2,400 shares on August 1, 1956, for the sum of Rs. 1,54,800 resulting in capital gain of Rs. 70,860 as computed under S. 12-B of the Income-tax Act. The whole amount realised by the sale of the shares was deposited by Bai Laxmibai with M/s. A. H. Bhivandiwalla and Co., in which Maneklal as well as his son, Sevantilal, happened to be partners. The amount deposited by Bai Laxmibai fetched a yearly interest of Rs. 9,288. In th