INVESTMENT LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) AT the instance of the assessee, the Income tax Appellate Tribunal, Delhi has, acting under Section 66 (1) of the Income-tax Act, 1922, stated the case and referred to this Court for its opinion the following question of law:

(2.) THE material facts as disclosed in the statement of the case are these. THE assessment year is 1953-54, the relevant account being 1952-58 ending on 31 March 1953. THE assessee is a company incorporated in the year 1948 with several objects set out in the Memorandum of Association, including those mentioned in Clause 16 thereof, which reads:

(3.) THE four grounds mentioned by the Appellate Assistant Commissioner, which were accepted by the Tribunal also, contra-indicale that the transaction in this case was an adventure in the nature of trade. It is, however, argued that merely because the assessee had valued the securities at cost and not at the lower market rates, it could not be concluded that they were investments and not the assessee's stock-in-trade. In a matter like this, so it was contended, all that can be insisted upon is adherence to a regular basis of valuation and the assessee is free to adopt his own method of accounting. This is undoubtedly correct and yet in considering whether the securities were stock-in-trade or an adventure in the nature of trade, it cannot be ignored that the generally accepted and established rule of commerical practice and accountancy is that anticipated loss is taken into account by valuing the closing stock at cost or market price whichever is lower : Chainrup Sampatram v. Commissioner of Income-tax West Bengal 1953-24 ITR 481: (AIR 1953 SC 519).