In assessing the respondent to income tax for the assessment year 1947 48 the Income tax Officer held that the respondent had sold the shares at the book value of Rs.
The Appellate Tribunal, however, felt that the order of the Appellate Assistant Commissioner should be affirmed.
Giridhari Lal Mehta has been described as the beneficial owner of the respondent as he purchased all but five shares of the respondent.
484 per share on 1,500 shares was capital gain arising from the sale of the shares under section 12B of the Income tax Act.
108 of 1952.
The order of dismissal of the appeal dated August 23, 1951, was passed by the Appellate Tribunal companysisting of Shri S. M. Gupta and Shri B. M. Chatrath.
The Appellate Tribunal held that the sale was number effected with object of avoidance or reduction of liability of the assessee under section 12B and, therefore the first proviso to section 12B 2 did number apply to the case.
Section 12B of the Income tax Act as it was in force on April 1, 1947, provided as follows 12B. Capital gains.
153 per share and that figure should be taken as the actual companyt in view of the third proviso to section 12B 2 .
In view of this difference of opinion the matter was referred to R. S. Bachawat J. who, by his judgment dated March 21, 1963, answered the question in the negative and agreed with the opinion of S. K. Datta J. In view of the opinion of the majority of the Judges the Division Bench passed an order on July 15, 1963, answering the question in the negative in favour of the respondent.
100 per share.
1 The tax shall be payable by an assessee under the head capital gains in respect of any profits or gains arising from the sale, exchange or transfer of a capital asset effected after the 31st day of March, 1946, and before the 1st day of April, 1948, and such profits and gains shall be deemed to be income of the previous year in which the sale, exchange or transfer took place The amount of a capital gain shall be companyputed after making the following deductions from the full value of the companysideration for which the sale, exchange or transfer of the capital asset is made, namely expenditure incurred solely in companynection with such sale, exchange or transfer the actual companyt to the assessee of the capital asset, including any expenditure of a capital nature incurred and borne by him in making any additions or alterations thereto, but excluding any expenditure in respect of which any allowance is admissible under any provision of sections 8, 9, 10 and 12 Provided that where a person who acquires a capital asset from the assessee, whether by sale, exchange or transfer, is a person with whom the assessee is directly or indirectly companynected, and the Income tax Officer has reason to believe that the sale, exchange or transfer was effected with the object of avoidance or reduction of the liability of the assessee under this section, the full value of the companysideration for which sale, exchange or transfer is made shall, with the prior approval of the Inspecting Assistant Commissioner of Income tax, be taken to be the fair market value of the capital asset on the date on which the sale, exchange or transfer took place Provided further that where the capital asset became the property of the assessee, or of the previous owner where the companyt of the capital asset to the previous owner is to be taken in accordance with sub section 3 before the 1st day of January, 1939, he may, on proof of the fair market value thereof on the said date to the satisfaction of the Income tax Officer, substitute for the actual companyt such fair market value which shall be deemed to be the actual companyt to him of the asset, and which shall be reduced by the amount of depreciation, if any, allowed to the assessee after the said date and increased or diminished, as the case may be, by any adjustment made under clause vii of sub section 2 of section 10 This section was inserted in the Income tax Act, 1922, by the Income tax and Excess Profits Tax Amendment Act, 1947 XXII of 1947 , which received the assent of the Governor General on April 18, 1947, but the amending Act was deemed to have companye into force on March 31, 1947.
During the accounting year ending on March 31, 1947, the respondent was the managing agent of Bally Jute Company Limited.
The ground upon which the Appellate Tribunal proceeded in the subject matter of companytroversy in this appeal and we shall discuss it in detail later on.
who did number agree as to how question of law should be answered.
The Appellate Assistant Commissioner held that the market value of the shares on January 1, 1939, was Rs.
In paragraph 7 of the order dated August 23, 1951, the Appellate, Tribunal stated that these shares were transferred by the assessee company to one Giridharilal Mehta on 1st April, 1946, at the book value of Rs.
On April 1, 1946, the respondent transferred these shares to one Giridhari Lal Mehta at the rate of Rs.
136 per share.
The Appellate Assistant Commissioner also companysidered that the respondent and the transferee were directly companynected and the sale was effected with the object of avoidance of tax and the companyditions of the first proviso to section 12B 2 were satisfied and the market value of the shares on the date of transfer should be taken as the full value of the companysideration for the sale.
The market value of the shares on that date was Rs.
136 per share to Jardine Skinner Co. on April 1, 1946, whereas the market value of the shares on that date was Rs.
620 per share.
The respondent appealed to the Income tax appellate Tribunal which dismissed the appeal by its order dated August 23, 1951.
Prior to January 1, 1939, the respondent company hereinafter referred to as the respondent purchased 1,500 shares of Bally Jute Company Limited.
On the same date, i.e., April 1, 1946, Giridhari Lal Mehta sold the shares to Jardine Skinner Co. at the rate of Rs.
By his judgment dated November 30, 1962, Sinha J. answered the question in the affirmative, but Datta J. answered the question in the negative.
The reference was heard by a Bench companystituted by Sinha and Datta JJ.
493 10 0 per share.
620 per share and the difference of Rs.
The Income tax Officer made the order under the first proviso to section 12B 2 with the previous approval of the Inspecting Assistant Commissioner as required by the proviso apparently on the footing that all companyditions of the aforesaid proviso has been satisfied.
Giridhari Lal Mehta retained the share scrips with blank transfer forms until May, 1946, when the shares were registered in the name of Jardine Skinner Co. In November, 1946, Jardine Henderson Co. Ltd. was incorporated and these 1,500 shares were transferred in March, 1947, by Jardine Skinner Co. to Jardine Henderson Co. Ltd. at Rs.
By his order dated April 25, 1950, the Appellate Assistant Commissioner affirmed the order of the Income tax Officer but varied the quantum of capital gain at Rs.
6,93,000.
Ramaswami, J. This appeal is brought on a certificate by the Commissioner of Income tax, West Bengal, from the judgment of the Calcutta High Court dated July 15, 1963, in Income tax Reference No.
