COMMISSIONER OF INCOME TAX MADURAI Vs. M RAMASWAMY

JUDGEMENT

(1.) THE two questions that are sought to be referred to this court for its opinion by the Revenue are as follows :

(2.) WHETHER the Appellate Tribunal's further finding to the effect that share being movable property can be transferred as per the articles of the company and the transferee gets the right of ownership even if the transaction is not entered in the share registers of the company is sustainable in law ""

(3.) THE facts leading to the filing of this reference petition may briefly be stated : The assessee is an individual having income from a partnership firm, share dividends, sitting fees, etc. He sold some shares during the year which he held in the Bank of Madurai and Rajendra Textile Mills Ltd. The said amount was considered for capital gains. He also sustained some loss in selling the shares of Alagappa Textiles (Cochin) Ltd., which was a sick mill. The latter shares were sold to Messrs. Karumuthu Ramaswamy Finance (P.) Ltd. at the rate of Re. 1 per share, while the face value of the share was Rs. 100. The ITO observed that the mills whose shares are stated to have been sold were declared as sick mills, the management having been taken over by the Government from April 1, 1974, and that after nationalisation, the compensation fixed by the Government was even inadequate to pay off the secured and unsecured creditors and, hence, the value of the share was practically "nil". Besides that, he noted that the purchasing company consisted only of three shareholders, the assessee, his brother and father.