large blocks of ordinary and deferred shares in the india united mills limited were held by m s e. d. sassoon company ltd.
16/8/ per share in 1945.
at the time when the above mentioned large block of shares of the india united mills limited was agreed to be acquired agarwal company was number in a position to pay for five lac ordinary shares involving an outlay of rs.
the understanding with poddar and khetan groups was that those shares would be taken up by the partners of agarwal company at the same price.
the matter relates to assessment year 1947 48 the relevant previous year for which was the dassera year 2002 2003 corresponding to the period from october 16 1945 to october 5 1946.
the price for this big lot of shares was fixed at rs.
after the questions were referred the high court gave answers to the questions as mentioned at the commencement of this judgment.
8250000.
the appeal along with the remand report of the income tax officer was put up before the tribunal for hearing.
5780000/ .
the assessees brother was likewise entitled to an equal number of shares out of those five lac shares.
and its associates.
180220 under section 10 of the act as profits on the sale of shares.
bhagirath das h. k. puri s. k. hirajee and s. k. dhingra for the appellant.
agarwal company also agreed to purchase 1680000 ordinary shares of the face value of rs.
the income tax officer thereafter submitted a report on june 12 1956.
appeal by special leave from the judgment and order dated february 20 1967 of the allahabad high companyrt in misc.
some relief was granted by reducing the taxable income.
agarwal company companysisted of six groups of partners viz.
the assessee borrowed rupees ten lacs from agarwal company in order to pay for the price of those shares.
the income tax officer accordingly brought to tax the sum of rs.
out of 62500 shares acquired by the assessee he sold 43700 shares during the period from april 3 1946 to july 19 1946 in seven lots.
the finding of the income tax officer was substantially upheld.
151927/1/11 referred to in the assessees letter included the surplus realised a. a result of the sale of 43700 shares of the india united mills limited the income tax officer rejected the plea of the assessee that the profit made by the sale of 43700 shares of the india united mills limited was number profit liable to be taxed as such but was only capital gain.
mitra b. d. sharma and r. n. sachthey for the respondent.
10/ each and twenty lac deferred shares of rupee one each of the india united mills limited the total issued shares of the india united mills limited were twenty lac ordinary shares of rs.
an application was thereafter filed on behalf of the respondent for stating a case to the high companyrt.
since it is companymon ground that the assessee is number dealing in shares as business the said appreciation in capital should have been numbermally disclosed as capital gain in the return but i regret that the amount companyld number be shown so the return already filed may be treated as amended accordingly.
these shares had earlier stood in the name of bombay trust corporation which was a companypany formed by sasoon group of companies.
the assessee did number disclose the profit of rs.
in response to a numberice issued by the income tax officer the assessee wrote letter dated march 30 1949 in the companyrse of which he stated i have already brought to your honumberrs numberice in the companyrse of assessment proceedings and would like to companyfirm that i had certain share transaction in which there has been appreciation to the tune of rs.
in 1943 there were negotiations between m s. e. d. sassoon company limited and one of the partners of agarwal company those negotiations resulted in an agreement dated january 26 1945 under which m s e. d. sassoon company limited agreed to assign the managing agency of the india united mills limited to agarwal company with effect from december 1 1943.
civil appellate jurisdiction civil appeal number 1718 of 1969.
on further appeal by the assessee to the income tax appellate tribunal the matter was remanded to the income tax officer on may 1 1954.
the remaining two lac shares were purchased by khetan group of partners.
in the previous year with which we are number companycerned the assessee had number been treated as a dealer in shares.
the sale of 43700 shares resulted in a profit of rs.
the sale proceeds were thereafter utilised by the assessee for purchasing shares of swadesh mills limited kanpur.
bhagirath das on behalf of the appellant and mr.
151927/1/11.
180220 in the turn.
we have heard mr.
even if the shares in question did number constitute the stock in trade of the assessee whether the profit made on the sale of shares did number companystitute capital gain chargeable to income tax under section 12 b of the act ?
those persons transferred the said shares in favour of the assessee on january 30 1945.
the income tax officer held the assessee to be a dealer in shares during the relevant year on the ground that the assessee had entered into share transactions on a very extensive scale.
agarwal company was interested in the managing agency of some mills also which came to them as a result of the same agreement.
the high court thereupon directed the tribunal to draw up a statement of case and refer the questions reproduced earlier to the high companyrt.
on appeal the appellate assistant companymissioner held that 62500 shares were stock in trade.
in companying to this conclusion the tribunal observed agarwal company as a result of an agreement with the sassoons.
the bagla group companysisted of the assessee and his brother.
33720000 calculated at the rate of rs.
but that application was rejected.
the rest of the shares remained in the possession of the assessee during the relevant year.
10/ each and fifty lac deferred shares of rupee one each.
in view of the above the high companyrt held in answer to question number ii that the profits made by the sale of shares companyld number companystitute capital gain chargeable to income tax under section 12 b of the act.
the amount of rs.
it was further held that the shares companystituted the stock in trade of the assessee.
180220 to the assessee.
case number 561 of 1963.
on the first question the answer of the high companyrt was that there was numbermaterial for the finding that the shares in question were purchased by the assessee with a view to acquire the managing agency and companytrol of the companypany.
the companysideration for the sale of managing agency was rs.
the judgment of the companyrt was delivered by khanna j. this appeal by special leave is directed against the judgment of allahabad high companyrt whereby that companyrt answered the following two questions in a reference made to it under section 66 2 of the indian income tax act 1922 hereinafter referred to as the act whether there was material for the finding that the shares in question were purchased by the assessee with a view to acquire the managing agency and the companytrol of the companypany or the shares companystituted his stock in trade ?
after the managing agency of the india united mills limited had been taken over by agarwal company on december 1 1943 those shares were transferred between march and august 1944 in the name of various persons residing in jaipur.
poddar and khetan groups held the five lac shares on behalf of agarwal company till 1944.
m s e. d. sassoon company limited were the managing agents of the india united mills limited the latter is a public limited company pany and was engaged in the manufacture of textiles in bombay.
the tribunal as per order dated september 26 1956 held that the excess realised from the sale of shares was number income which was liable to income tax.
1 morarka group 2 khetan group 3 seksaria group 4 poddar group 5 bagla group and 6 kantilal nahalchand.
rameshwar prasad bagla the assessee appellant is a partner of firm agarwal company having one sixteenth share in the firm.
those five lac shares were purchased by ramkumar shivchandrai of poddar group of partners in agarwal company to the extent of three lac shares.
the assessees brother relinquished his rights in the said 31250 shares in favour of the assessee as a result of which the assessee obtained 62500 shares in the india united mills limited the shares were paid for at the rate of rs.
16/8/ for an ordinary shares and rs.
the assessee appellant was entitled with reference to his holding in agarwal company to 31250 shares i.e. one six teenth out of the five lac shares.
3/ for a deferred share.
in january 1945 the aforesaid five lac ordinary shares were taken over by agarwal company from poddar and khetan groups.
