COMMISSIONER OF INCOME TAX Vs. SUGAR DEALERS

JUDGEMENT

(1.) THIS is a reference under Section 66(1) of the Indian Income-tax Act, 1922, at the instance of the Commissioner of Income-tax, Kanpur.

(2.) THE assessee is a registered dealer and deals in sugar. THE assessment year involved is 1957-58 with the previous year ending on 12th April, 1957. During the previous year it purchased 5,200 shares of Rohtas Industries at their face value of Rs. 52,000. THEse shares were sold for Rs. 1,16,909 during the previous year on August 23, 1956. THEre was thus a surplus of Rs. 64,909, which the assessee claimed to be a capital gain. THE Income-tax Officer held that the surplus earned by the assessee was profit arising from the business. THE Appellate Assistant Commissioner of Income-tax agreed with this finding of the Income-tax Officer. On second appeal the Income-tax Appellate Tribunal accepted the assessee's contention and held that the surplus arising from the sale of shares was capital gain.

(3.) THE next question to be considered is as to whether the loss could be claimed in the assessment for the year 1957-58. Here again there is no dispute that the security was forfeited by the Deputy Director (Food) by his letter dated November 1, 1956, which date is within the previous year for the assessment year 1957-58. If nothing else had happened the loss would have been allowable in the assessment year 1957-58 but it appears that the assessee did not accept the forfeiture and took legal steps to recover the amount from the Deputy Director. THE matter ultimately was finally decided on September 6, 1965, as mentioned earlier. THE contention of the department is that the loss could not be said to have accrued until the final award on September 6, 1965, by the Regional Director (Food) and, as such, the assessee could not be said to have suffered loss in the relevant previous year.