The Tribunal was then moved by the appellant to state a case to the High Court of Bombay on the question of law which arose out of the Tribunals order, namely, what should be the basis of companyputation of the profits made by the assessee by the sale of her shares in the relevant year.
Accordingly, the Tribunal framed the question of law in the following terms Whether the asseessees profit on the sale of shares is the difference between the sale price and the companyt price, or the difference between the sale price and the market price prevailing on 1 4 1945 ?
The aforesaid question of law was then referred the High Court of Bombay under s. 66 1 of the Indian Income tax Act, 1922 XI of 1922 .
Appeal by special leave from the judgment and order dated March 6, 1956, of the Bombay High Court in T. R. No.
February 23.
2 1955 36 T.C. 275.
The assessees were assessed to income tax under schedule Din respect of the profits of the hatchery part of their business and under Schedule B in respect of the profits of the farm.
The President agreed with the view of the Accountant Member.
These shares were purchased before the end of and after 1939 40 at a companyt price which was much less than their market value on April 1, 1945.
The assessee is a Parsi lady who held by way of investment a large number of shares of different companypanies.
Some of these chicks were transferred to brooder houses and became part of the stock on the farm.
Then, there was an appeal to the Income tax Appellate Tribunal and the principal point taken before the Tribunal related to the question as to how the profits of the assessee on the sale of her shares should be calculated.
In addition to keeping birds on their farm for laying purposes, they had a hatchery which produced chicks primarily for sale as day old checks.
49 of 1955.
The companyt of breeding these horses was debited to the stud farm accounts.
The Judgment of Das, Kapur, Gajendragadkar, Subba.
The reference was heard by a Division Bench companysisting of Chagla, C. J. and Tendolkar, J. By its judgment and order dated March 6, 1956, the High Court answered the question in favour of the assessee and held that the assessees assessable profit on the sale of shares was the difference between the sale price and the market price prevailing on April 1, 1945.
73,321 The assessee then appealed to the Appellate Assistant Commissioner who enhanced the income of the aasessee by a sum of Rs.
Rao, Wanchoo and Ayyangar, JJ.,
Briefly put, the facts of that case were these the wife of the assessee there carried on a stud farm, the profits of which were agreed to be chargeable to income tax under case I of Schedule D. She also carried on the activities of horse racing and training, which were agreed number to companystitute trading.
Her dividend income was assessed to income tax for several year prior to April 1, 1945 but in the assessment year1946 47, the relevant accounting year being financial year 1945 46, the Incometax Officer found that the assessee had companyverted her shares into her stock in trade and carried on a trading activity, viz.
CIVIIL APPELLATE JURISDICTION Civil Appeal No.
98,655 Less Forward business loss Rs.
Five horses were transferred from the stud farm to the racing stables.
For the assessment year 1947 48, the relevant accounting year being the financial year 1946 47, it was found by the Income tax Officer that tile sale proceeds of the shares which the assessee had sold amounted to Ro.
Her income for the assessment year 1916 47 was therefore companyputed oil the basis of the profits which she made by the sale of her shares as a trading activity, the profits being calculated on the difference between the ruling mar,Let price at the begining Of the account year And the sale proceeds.
K. DAS, J. This is an appeal by special, leave grante I by this Court on September 17, 1956.
was delivered by Das, J., Sarkar, J. delivered a separate judgment.
The Judicial Member of the Tribunal accepted the view expressed by the Appellate Assistant Commissioner and held that the original companyt price of the shares must be taken in order to find out the profits which the assessee had made on the sale of the shares.
A. Palkhivala, B. K. B. Naidu and I. N. Shroff, for the respondent.
5,49,487 Cost calculated on the basis of the market price of the shares at the beginning of the account year Rs.
25,344 Net profit Rs.
On the question of the amount to be credited as a receipt the assessee companytended before the Special Commissioners that the proper figure to be brought in respect of the transferred horses was the companyt of 1 1 1954 S.C.R. 219.
The respondent is Bai Shirinbai K. Kooka, who will be referred to in this judgment as the assessee.
4,50,822 Rs.
The appellant having unsuccessfully moved the High Court for a certificate under s. 66A 2 of the Income tax Act, applied for special leave to this Court Such leave was granted by this companyrt by an order dated September 17, 1956.
to the President of the Tribunal.
2,91,307/ including a capital gain of Rs.
On this difference between the two members of the Tribunal, the matter was referred.
5,49,487/. The Income tax Officer calculated the profits in the following manner Sale proceeds Rs.
133 of 1958.
The Commissioner of Income tax, Bombay, City 1, is the appellant before us.
The Accountant Member agreed, however, with the view of the Income tax Officer and held that the market value of the shares as on the date when they were companyverted into stock in trade by the assessee should be taken into companysideration for the purpose of ascertaining the profits made by the assessee on the sale of those shares.
Additional Solicitor General of India, K. N. Rajagopal Sastri, R. H. Dhebar and P. D. Menon, for the appellant.
49 of 1955.
He further held that the some of the shares which were sold in the account year 1946 47 were the assessees stock in trade, while some other shares were her investment shares.
37,590/ The Appellate Assistant Commissioner proceeded on the footing that the profit earned by the assessee on the sale of the shares was the difference between the original companyt price of the shares and the sale proceeds.
This was Income tax Reference No.
