COMMISSIONER OF INCOME TAX Vs. DHANUKA AND SONS

JUDGEMENT

(1.) The facts found and/or admitted in the present proceedings are of a short compass. Messrs. Dhanuka & Sons, the assessee, is a registered firm and at the material time had been carrying on business in purchase and sale of shares. It was also an investor in shares. In its accounts the opening stock as well as the closing stock of shares held in its business used to be valued at the market rate thereof prevailing on the said dates.

(2.) In the assessment year in question, viz., 1958-59, the relevant accounting period being the year ended Dewali S.Y. 2014, the assessee held certain shares of a company known as Messrs. Bengal Paper Mills Ltd. (hereinafter referred to as "the said company"). 12,652 shares of the said company, as part of the opening stock of the assessee, were valued at Rs. 110 per share, and at closing 952 shares thereof valued at Rs. 80 per share were retained on the 19th October, 1957. 2,702 shares of the said company had been transferred from the trading account of the assessee to its investment account at Rs. 80 per share two days before the closing of the assessee's accounts.

(3.) At its assessment the assessee claimed a loss on account of transfer of the said 2,702 shares from its trading account to its investment account aggregating to Rs. 81,060. The ITO held that the loss claimed by the assessee did not arise on account of any dealing in the said shares or on the valuation thereof on the date of the closing of the accounts, such loss was being claimed on mere transfer of the said shares from the assessee's share account to its investment account for which no loss could accrue. A profit or loss could only arise when a particular item was either sold or taken to the closing stock and valued according to the method followed. The ITO, therefore, added back the said sum of Rs. 81,060 to the income of the assessee.