GREZO A Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference under Section 66(2) of the Indian Income-tax Act.

(2.) THE assessee is a Greek national who has been in India for a period of 45 years. He was an employee and representative at Kanpur of Messrs. Patel Cotton company Limited, Bombay. He was drawing a salary as also a commission. THE salary and the commission were kept in deposit with his employers in Bombay. THE amount had accumulated to a large sum and on 17th April, 1939, he sent a telegram to his employers to purchase nine bars of gold on his account and keep the same in the safe custody of the Lloyds Bank, Bombay. This gold was purchased for Rs. 2,21,250 and was deposited with the bank. In 1942 the Lloyds Bank of Bombay was no longer willing to keep the gold in its safe custody as the war situation had worsened and the assessee got the gold transferred to Kanpur and kept it with the Chartered Bank of India there. On 13th October, 1944, the gold was sold for Rs. 3,98,302. Thus there was a difference of Rs. 1,77,052 in favour of the assessee.

(3.) THE assessee was examined and he gave his statement and the reason why he had purchased those nine bars of gold. His statement, in brief, was that the situation in Italy and Greece was such in April, 1939, that it was clear to everybody that war was imminent. Sri Pathak wanted to refer us to a news item in the Pioneer of the 16th of April, 1939, was not before the Tribunal and we do not think we would be justified in admitting it as additional evidence. We must, therefore, confine ourselves to such facts and circumstances as appear from the record or of which we can take judicial notice. THE assessee had filed a detailed list before the Tribunal giving the various incidents that had happened in March and April, 1939, which gave rise to a feeling of apprehension that outbreak of war was imminent. From this list it appears that in March, 1939, Germany had invaded Czechoslovakia and had annexed it. THEre was partial mobilisation by France, Rumania and Hungary. In April, 1939, Albania had been invaded by Italy. We need not got into further details but there can be no doubt that, in April, 1939, there was considerable nervousness among the people of the world that a second world war was imminent. THE Appellate Assistant Commissioner of Income-tax has found that the amount to the credit of the assessee with Messrs. Patel Cotton company Limited, Bombay, in April, 1939, was Rs. 2,23,209-8-9. THE assessee, therefore, practically utilised the whole of this amount in purchasing the nine bars of gold. By this purchase the whole of his capital became sterilised and had ceased to give him any income whatsoever. From the commercial chart showing closing prices of gold during the years 1939 to 1946, we find that gold prices were steady up to the end of 1941, except that there was slight rise from August, 1939. Gold, however, began to shoot up in price from January, 1942, and had reached its peak in May, 1943, when the price was as high as Rs. 97 per tola. THE assessee had purchased the gold at the rate of Rs. 37-0-6 per tola. THE circumstance that, even when the price of gold had more than doubled itself and was almost three times the original purchase value, the assessee did not part with any portion of it is a circumstance in his favour to which the Income-tax Appellate Tribunal has attached no significance. From May, 1943, the price of gold started falling except for occasional rises and in October, 1944, when the gold bars were sold, the price was Rs. 66-9-0 per tola which was a very low price, considering prices ranging before and after that month. It does not, therefore, appear that the assessee was trying to make a profit by selling gold at a favourable rate, having bought it at Rs. 37-0-6 per tola before the war.