GOVAN BROTHERS Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THESE are two income-tax references under section 66(1) of the Income-tax Act. They arise out of a consolidated appellate order of the Income-tax Appellate Tribunal and may be conveniently disposed of by a common judgment.

(2.) THE question referred to us for opinion in the first reference is :

(3.) THE fixed terms of twenty years of the managing agency was to continue for four years from the end of the accounting year in question. In both the managed companies the Nawab of Rampur was a major shareholder. On April 25, 1950, the assessee purchased from the Nawab 43,000 shares of the Raza Sugar Company and 66,478 shares of Buland Sugar Company for a sum of Rs. 19,04,126. THE assessee alleged that the purchase was with a view to acquire a controlling interest in the two companies in order to make certain of the continuance of the managing agency. THE assessee had very little funds of its own to pay the purchase price. Accordingly, it took loans at 6% from (1) Vyapari Ltd., New Delhi, and (2) Govan Agencies Ltd., New Delhi. Even then the full purchase price of the shares could not be paid to the Nawab and the assessee remained indebted to him for part of the purchase price. Interest was accordingly paid by the assessee as under on the loans and the amount still due to the Nawab. <FRM>JUDGEMENT_930_ITR48_1963Html1.htm</FRM>