JAIN S P Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN this case the assessee claimed a loss of Rs. 2,62,292 in share dealings for the assessment year 1950-51, which corresponds to the previous accounting year of the assessee ending on the 31st October, 1949. Out of this amount the loss of Rs. 2,12,540 was attributed to the alleged sale by the assessee of certain shares to Bharatiya Gyan Pith, Kashi, which is a charitable institution. IN the accounting year ending on the 31st October, 1948, the assessee introduced into his accounts the shares valued at Rs. 5,07,930, crediting this sum to his capital account. Simultaneously a debit entry was made in his accounts of Rs. 3,00,000 as donation to Bharatiya Gyan Pith, and a corresponding credit entry was made in the newly opened account styled as "Bharatiya Gyan Pith Account". No cash payment in relation to this credit entry was made to that charitable institution in that year. But in the accounting year ending on the 31st October, 1949, the assessee debited the credit entry in the name of the charitable institution with a sum of Rs. 3,00,000 which represented the then value of the shares held in the books at Rs. 5,07,930. On behalf of the assessee it was contended before the INcome-tax Officer that he had become indebted to the charitable institution in the accounting year 1947-48 to the extent of Rs. 3,00,000, being his donation to the charitable institution and that he discharged this liability in the accounting year 1948-49 by selling to the charitable institution shares originally acquired for Rs. 5,07,930 at their then market value of Rs. 2,95,390. The INcome-tax Officer rejected the claim of the assessee on the ground that the assessee merely made a donation of the shares in specie and no question of business loss arose from the transfer of the shares. The Appellate Assistant Commissioner agreed with the INcome-tax Officers finding. Before the INcome-tax Appellate Tribunal it was submitted on behalf of the assessee that there was a debt to the extent of Rs. 3,00,000 from the assessee to the charitable institution as a result of the entries in his books on the 31st October, 1949. It was contended that the assessee transferred the shares in discharge of his debt and the transaction was tantamount to a sale and the assessee was entitled to the loss of Rs. 2,12,540 as a revenue loss. The Tribunal rejected the claim of the assessee and held that the transfer of the shares to the charitable institution in the accounting year 1948-49 was not tantamount to a sale and the assessee was not entitled to claim a loss of Rs. 2,12,540 as a revenue loss arising from his share business.

(2.) UNDER section 66(1) of the Indian Income-tax Act the Appellate Tribunal has stated a case for the determination of the High Court on the following question of law :