COMMISSIONER OF INCOME TAX Vs. GOVIND D GOKHALE

JUDGEMENT

(1.) AT the instance of the revenue the following question has been referred to us for our determination : 'Whether, on the facts with and in the circumstances of the case, the provisions of section 44E were attracted ?'

(2.) THE question relates to the assessment years 1952 -53, 1953 -54 and 1954 -55, the corresponding accounting periods being the financial years ending March, 1952, March, 1953, and March, 1954, respectively. The assessee is an individual and in the reassessment proceedings for these years one of the questions that was raised pertains to the above questions.

(3.) ON October 17, 1950, Chitre purchased 256 shares of the above company from on F. S. Kerr, who was also a director at the material time, for the price of Rs. 25,600 at the fact value of Rs. 100 per share. This purchase was effected by him after borrowing money from one Ranade, who was also a director of the company. Ranade was repaid the amount, partly by borrowing Rs. 17,000 from the assesssee and the balance of Rs. 8,600 from out of his savings. On July 11, 1951, Chitre purchased 160 shares from the assessee, at Rs. 125 per share. The price was not paid by cash, but was regarded as having been paid by taking a loan from the assessee. As and when dividends in respect of these shares were declared, part payments were made by Chitre to the assessee towards the amount borrowed. Some amounts other than dividends were also paid. In all an aggregate sum of Rs. 23,940 was paid by Chitre towards the total borrowing of Rs. 37,000 made at the time of purchase of 160 shares as well as for repayments of the amounts borrowed from Ranade. A balance of Rs. 13,060 remained outstanding on which the assessee did not receive any interest from Chitre. On June 2, 1954, the said shares, aggregating to 416 shares, where sold by Chitre to the assessee at the respective purchase proves. After adjusting the amounts due to the assessee, a balance of Rs. 32,540 remained due and payable in respect of the price of the said shares, and the assessee passed a promissory note in favour of Chitre for the said amount on September 31, 1954. On the amount of promissory note, He did not pay any interest to Chitre. Part payments were made by the assessee to Chitre as under : Rs. 10,000 on December 10, 1954;Rs. 2,000 on August 6, 1955;Rs. 3,000 on March 3, 1957;Rs. 3,000 on May 7, 1959;Rs. 8,000 on November 19, 1960; and the balance ofRs. 6,540 on April 3, 1962.