The total number of shares in the first companypany acquired by the assessee during the years 1943 to 1953 aggregated to 60,700 shares.
Ultimately the case was referred to the President of the Tribunal under Section 5A 7 of the Income tax Act 1922.
The Income tax Officer, however, held that the profit was taxable as the assessee was entitled under its Memorandum of Association to deal in shares.
The immediate necessity for the sale of the shares was stated to be the reduction of the bank overdraft with the Central Bank of India and the entire sale proceeds were deposited with that Bank.
The Judicial Member held that the assessee was trading in shares whereas the Accountant Member took the companytrary view and held that the department had failed to bring on record any evidence to show that the purchase of shares in managed companypanies had been made with an intention of selling them at a profit.
Ultimately on the Tribunal being moved the following question of law was referred to the High Court Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that the profit of Rs.
1,26,027/ on the sale of the aforesaid shares was capital gain.
The Appellate Assistant Commissioner was of the view that the profit resulting from the sale proceeds was revenue receipt as the purchases were made in several lots and the past records showed that the assessee had been regularly purchasing and selling shares mostly of those companypanies of which it or its associated companycerns were the managing agents.
There was a difference of opinion between the Judicial Member and the Accountant Member of the Tribunal.
The question which was referred to him was whether the assessee was or was number a dealer in shares during the relevant accounting period.
1,26,027/ arose to the assessee in the companyrse of its business as a dealer in shares and as such was liable to be assessed as a revenue profit?
1,29,401/ whereas the sale of the shares of the other two companypanies led to a loss of Rs.
It acts as managing agents of various companypanies including National Pipes and Tubes Company Ltd., Indian Conduit Pipes Ltd. and National Rolling and Steel Ropes Ltd. During the assessment year 1957 58 the accounting year being the financial year ending March 31, 1957 the assessee sold 20,000 shares of the first companypany, 14,150 of the second companypany and 10 Preference shares of the third companypany.
As a matter of fact the assessee had never been treated as a dealer in shares in any of the past assessments and its holdings in the various companypanies were treated as investment and number as stock in trade of the assessees shares dealing business The assessee claimed that the net profit of Rs.
It was thus found to be a capital and number a revenue receipt.
The sale of the shares of the first companypany resulted in a profit of Rs.
The President of the Tribunal, agreed with the Judicial Member that the assessee was a dealer in shares which were companyfined to the shares of the managed companypanies.
Out of this holding 10,700 shares were sold in 1955 and 20,000 shares were sold during the year ending March 31, 1957.
The profit that arose to the assessee on the sale of 10,700 shares in 1955 was number subjected to tax as the income tax authorities held that the assessee was number a dealer in shares.
When the appeal was taken to the Tribunal it was pointed out by the departmental representative that the profit from the sale of shares in question had been credited to the profit and loss account.
N. Grover, J. This is an appeal by special leave from a judgment of the Calcutta High Court in an Income tax Reference.
The assessee is a private limited companypany.
3374/ Thus there was a net profit of Rupees 1,26,027/ from the sale of shares of all the three companypanies.
