COMMISSIONER OF INCOME TAX Vs. G RAJAM

JUDGEMENT

(1.) THESE two references deal with two dealers in company shares. This means that company shares are their stock-in-trade. They were being assessed to income-tax on the profits they were making year by year in the purchase and sales of shares as stock-in-trade. Some of the shares they held were in the Indian Bank Limited. Consequent on the nationalisation of the Bank, the Indian Bank Limited went into liquidation. The liquidator paid over to these two assessees certain sums as"dividends" in the winding up. In one case the amount was Rs. 3, 376 and in the other it was Rs. 1, 124.

(2.) THE assessees claimed before the ITO that these amounts must be assessed under the head 'Capital gains'. THE Officer rejected this claim on the score that the assessees were dealers in shares and the Indian Bank shares were part of their stock-in-trade and nonetheless so for the fact that the company was under liquidation. He accordingly included the dividends distributed by the liquidator as part of the business profits of the two assessees assessable under the head 'business'.

(3.) IN these references at the instance of the CIT, the question of law is whether the amounts of Rs. 3, 376 and Rs. 1, 124 were liable to tax only under the head 'Capital gains' in terms of s. 46(2) of the IT Act, notwithstanding that the assessees were dealers in shares.