COMMISSIONER OF INCOME TAX Vs. SHANTI PRASAD JAIN

JUDGEMENT

(1.) The short point referred in this case under section 66(1) of the Indian Income-tax Act at the instance of the Commissioner of Income-tax, Bihar and Orissa, is whether, on the facts and in the circumstances of the case, the loss of Rs. 1,24,668 arising on the sale of shares was an admissible deduction as a loss arising in the course of the assessees business of dealing in shares. The relative assessment year is 1953-54. It is now not disputed that the assessee also carries on business of buying and selling shares of limited companies. In the previous year concerned with this assessment, he claimed a loss of Rs. 1,24,668 that he suffered in the sale of shares in some limited companies. The income-tax Officer as well as the Appellate Assistant Commissioner thought that the loss was of a capital nature as no element of trade was in existence in the transactions of sale of the shares. When the assessee came in appeal before the Appellate Tribunal, it took just the contrary view and held that, with reference to the statement filed by the assessee regarding the total share capital of various companies and the shares of those companies and the voting power acquired by the assessee it was patent that the finding of the Appellate Assistant Commissioner to the effect that the acquisition of these shares of those companies was with a view to gain or retain a controlling interest of those companies was wring. It also found that the assessees shares were not sold at price lower than the ruling market price. On these conclusions, the Tribunal was of the opinion that the loss sustained by the assessee was in the regular course of business of dealing in shares and there was no extra commercial element involved in it.

(2.) Learned counsel for the revenue urges that the shares which were sold by the assessee, with which we are now concerned, had been acquired by him at the time when the respective companies were floated and he was one of the promoters of those companies. At that point, his intention could not have been to deal in the shares with a view to making a profit out of such transaction. It is difficult to find any material on record to support this contention. On the other hand, the statement printed in the paper-book at page 1 clearly shows that the assessees holding of shares of these companies was much more than the scrips disposed of, in connection with which he claimed the loss 1,24,668. In view of the clear finding of the Tribunal that not with a view to controlling the management of the companies or to gaining an advantage of enduring character, the assessee had purchased these shares, it would be difficult to assume that the loss ultimately incurred by him when he disposed them of not at a price lower than the ruling market price was not in the ordinary course of his business. Learned counsel referred us to the Appellate Assistant Commissioners order where he mentioned that the assessee acquired directly or indirectly a predominating and controlling interest by purchase of these shares. This has, however, been negatived by the Tribunal. That being a question of fact, we should not go behind it, particularly when it is not challenged that the finding by the Tribunal was without the support of any evidence or that it was perverse. In their application for reference, the department did not controvert that finding. Thus the main plunk of the argument with reference to the intention of the assessee at the time of acquisition of these shares has failed.

(3.) The other contention that the assessee held these shares for much longer period than a dealer in shares usually does, has equally no force. The disposal of the shares, it is argued, was in favour of the companies in which the assessee is greatly interested and has, in association with the members of his family and relations, controlling power. The transfer of these shares to those companies has not yielded any benefit to the assessee more than what between associate companies. The important fact that the shares were sold not below the market rate, as found by the Tribunal, dispels any suspicion about extra commercial element.