BABUBHAI M SANGHVI Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) BY this reference made to us by the Tribunal under section 66 (1) of the Indian Income -tax Act, 1922, at the instance of the assessees the following four questions have been referred for out determination :

(2.) THE facts giving rise to this reference may be stated. Three assessees in the case are Babubhai M. Sanghvi, Ratilal M. Gandhi and Nagardas Ranchhoddas Sanghvi and the relevant assessment year is 1960 -61, the accounting year being S. Y. 2015. All the three assessees are the p.ners in the firm called R. Ratilal and Co. Each of them has a son or sons as partners in the said firm. Thus, Babubhai M. Sanghvi has a son, Dhirajlal, as partner, Ratilal M. Gandhi has a son, Kirit, as partner and Nagardas R. Sanghvi has two sons, Arun and Gaurang, as partners. The assessees as well as the three sons mentioned above also held certain number of shares in a public company called Bhavnagar Vegetable Products Ltd. Each of the three assessees and their sons held certain blocks of ordinary and preference shares in this company. Besides being partners in the firm, R. Ratilal and Co., and being shareholders of Bhavnagar Vegetable Products Ltd. as above, Ratilal and Nagardas were also directors of the said company during the relevant accounting years; so also Babubhai's son Dhirajlal. It is undisputed that the three assessees and the members of their family formed one group and the members of another family called the 'merchant family' formed another group and between them the two groups held a controlling interest in the aforesaid company.

(3.) ADMITTEDLY the face value of each share was Rs. 100 and the shares were sold to the various persons indicated above at the uniform price of Rs. 125 per share.