JUDGMENT :

R.C. MANKAD, J.

1. The Income-tax Appellate Tribunal (hereinafter referred to as the "Tribunal") has, at the instance of the assessee, referred to us for our opinion the following question under section 256(1)of the I.T. Act, 1961 (hereinafter referred to as the "Act") :

"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee was liable to pay tax in respect of capital gains on receipt of the amount equal to the face value of the preference shares of M/s. Universal Corporation Pvt. Ltd., on the company redeeming its preference shares ?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the assessee was liable to be taxed to capital gains arising on sale of the shares of Swastic Oil Mills Pvt. Ltd. by Anarkali Trust No. 1 whereby the assessee is a sole beneficiary for the year under reference ?

(3) If the answer to question No. 2 above is in the affirmative, whether the Tribunal was justified in law in holding that while making out the capital gains in respect of the said transaction relief under section 80T should not be allowed to determine capital gains of the trust and relief only once determining taxable capital gains in the assessment of the assessee where the capital gains were finally taxed ?"

2. Out of the three question referred to us question No. (2) is directly covered by a decision of this court in Kum. Pallavi S. Mayore v. Commissioner of Income Tax, (1981) 127 ITR 701 (Guj). Following the said decision, this question shall have to be answered in the negative and against the Revenue. We, therefore, answer question No. (2) accordingly. In view of our answer to question No. (2), question (3) does not survive and, therefore, it need not be answered.

3. This leaves question No. (1) for our consideration. The facts so far as this question is concerned, briefly stated, are as follows. The assessee is an individual and the assessment year under reference is assessment year 1969-70, the year of account being the calendar year 1968. The assessee held 297 redeemable preference shares in M/s. Universal Corporation Private Ltd., a company incorporated under the Companies Act (hereinafter referred to as the "company"). The face value of each of these preference shares was Rs. 1,000 and, therefore, the total face value of these shares came to Rs. 2,97,000. The assessee had purchased these shares for Rs. 2,66,550. The company decided to redeem the preference shares and the assessee received Rs. 2,97,000 face value of the shares held by her in the year of account relevant to the assessment year under reference. Thus the value of the shares received by the assessee exceeded the value which she had paid for these shares by Rs. 30,450. The ITO assessing the assessee sought to tax this amount of difference as capital gains under section 45 of the Act. The assessee resisted the action proposed by the ITO by contending that the redemption of her preference shares by the company would not amount to a transfer within the meaning of section 2(47) of the Act and consequently the difference between the value received by her from the company on the redemption of the shares and the price which she had paid for the shares, was not exigible to tax. In other words, according to the assessee, even if there was any profits or gains, as a result of the redemption of the shares by the company, such profit or gain could not be said to have arisen from the transfer of a capital asset. The ITO, however, rejected the contentions raised on behalf of the assessee and brought capital gains arising out of the redemption of the shares tax. The AAC, having confirmed the view taken by the ITO, the assessee carried the matter in appeal before the Tribunal. Relying on the decision of this court in the case of Commissioner of Income Tax v. R.M. Amin, (1971) 82 ITR 194 (Guj), it was urged on behalf of the assessee before the Tribunal,