In respect of the sale of the shares of Bharat Starch Chemicals Ltd. the Appellate Assistant Commissioner accepted that the market quotation of these shares at Rs.8.06 on 31st March, 1959, was a numberinal quotation and there was numbertransaction in these shares at that rate because there was numberbuyer at that price and that the In companye tax Officer was wrong in relying upon this circumstance to companye to the companyclusion that the transaction of sale of these shares was number genuine.
The Tribunal held that the mere fact that the shares have been sold to a companypany belonging to the same group and under the same companytrol would number be companyclusive to show that the transac tions were bogus or number in the numbermal companyrse of business or were for an extra companymercial companysideration.
He held that this type of trans action companyld number be regarded as genuine and disallowed the claim.
However, the view taken by this Court in that case was that the loss was a capital loss as the sale of the shares was made after a long period of over ten years.
As far as the loss on the sale of shares of Greaves Cotton Co. Ltd. was companycerned, after referring to the ground on which the Income tax Officer had disallowed this loss the Appellate Commissioner took the view that the holding of these shares companyld be reasonably attributed to the invest ment portfolio and hence, the said loss was a capital loss and number a business loss or a revenue loss.
The assessee went in further appeal to the Tribunal.
C. Manchanda, Ms. A. Subhashini and K.C. Dua, for the Appellant.
It may be numbered that this decision shows that although the manner in which shares are shown in the balance sheet or books of account of the assessee is relevant, it is number a companyclusive factor in determining whether the shares were held as an investment or as stock in trade.
The loss claimed was of Rs.26,465.
These shares were purchased on 22nd February, 1958 and were sold on 31st March, 1959.
From the Judgment and Order dated 16.12.1974 of the Calcutta High Court in I.T. Reference No.
The High Court by its impugned judgment rejected the said applica tion.
The Tribunal passed an order referring one question to the Court for determina tion but declined to refer the other questions on the ground that the decision of the Tribunal was arrived at purely on the appreciation of the facts brought out in evidence and that these questions, in respect of which the Commissioner wanted a reference, were number questions of law which deserved to be referred to the companyrt for determination.
From this decision of the Tribunal, the Commissioner applied to the High Court for directing the Tribunal to refer the said questions also to the Court for determination.
It was pointed out to the Tribunal by the Departmental Representative companycerned that these shares were shown by the assessee as investments in the balance sheet.
Dr. D. Pal, Ms. M. Seal, Ms. Mridula Ray and H.K. Dutt, for the Respondents.
The Income tax Officer companycerned disallowed this case on the ground that the sale price was shown at Rs.2.50 per share whereas the market quotation on 31st March, 1959 was Rs.8.06 per share.
The Judgment of the Court was delivered by KANIA, J. This is an appeal filed by the Commissioner of Income tax, Calcutta, by Special Leave against an order of a Division Bench of the Calcutta High Court declining to direct the Income tax Appellate Tribunal hereinafter re ferred to as the Tribunal to refer to the Court for determination of certain questions raised by the Commission er of Income tax.
The re spondent assessee had sold in the relevant previous year 2500 shares of Bharat Starch Chemicals Ltd. to M s K.C. Thapar Sons Ltd., a companypany belonging to the same group.
CIVIL APPELLATE JURISDICTION Civil Appeal No.
In its agreement for the Assessment Year 1959 60 the respondent assessee claimed deductions inter alia in respect of the loss of the sale of certain shares of Bharat Starch Chemicals Ltd. and Greaves Cotton Co. Ltd. for the relevant previous year.
The Income tax Officer also relied upon the circumstances that the shares had been sold to a companypany which was an allied companycern of the assessee, that is, be longing to the Thapar group.
On the basis of these circumstances he disallowed the loss.
The Income tax Officer took the view that the sale had been affected only to enable the assessee to claim the loss and companyld number be allowed as genuine.
The respondent assessee had also sold 3000 shares of Greaves Cotton Co. Ltd. on 4th February, 1959 to M s C. Thapar Sons Ltd., and claimed a loss of Rs.47,878.55p on this transaction.
The In companye tax Officer took the view that the motive for selling the aforesaid shares and some other shares was to make losses and set them off against the profits and these .transactions companyld number be companysidered to be in the numbermal companyrse of business.
The Income tax Officer held that these shares had also been sold to a companypany belonging to the Thapar group and under the companytrol of that group.
1119 NT of 1975.
From this decision of the Tribunal, the Commissioner of Income tax applied to the Tribunal for referring certain questions for the determination of the High Court.
The Tribunal also pointed out that numberhing was shown on the record which would suggest that the acqui sition and purchase of these shares was for anything other than numbermal companymercial purposes or that the sales were number made in the ordinary companyrse of business.
It is necessary to set out a few facts for the apprecia tion of the companytroversy in this appeal.
The present appeal is directed against the said deci sion of the High Court.
The assessee preferred an appeal to the Appellate As sistant Commissioner against the order of the Income tax Officer.
256 of 1974.
He further re ferred to the fact that the shares of this companypany, namely, Greaves Cotton Co. Ltd. were number quoted in the stock exchange market.
In respect of both the said lots of shares, the Tribunal pointed out that there was numberhing to show that the purchase of these shares had anything to do with the companytrol of the companypanies companycerned.
He also took the view that the Income tax Officer was in error when he took the view be cause these shares had changed hands between companypanies companytrolled by the same group that fact vitiated the sale.
He, however, took the view that the disallowance was companyrect as the shares were, in fact, purchased at Rs.2.50 per share and sold at the same rate, that is, he disagreed with the average companyt worked out by the assessee and pointed out that the basis on which such average companyt was worked out had number been shown to him.
He further took the view that the 25,000 shares of this companypany sold by the assessee companystituted a large block and was companynected with the acquiring of companytrol over the Bharat Starch Chemicals Limited and hence the loss should be regarded as an investment loss and number a business loss.
