The shares of Fort William Jute Co. Ltd., were purchased by the assessee by obtaining an overdraft from a Bank.
For the acquisition of these shares the assessee had to overdraw on its Bank account.
M s. Bangut Bros., were appointed as the managing agents of Fort William Jute Company for a period of ten years with effect from July 1, 1952.
These shares were acquired in one lot from Mugneeram Bangur Co. and sold back to the same companycern in one lot which was altogether unusual.
50 more shares were acquired on May 27, 1952 at Rs.
The assessee was companynected with the Bangurs only to the extent that out of its four Directors two of the Directors were Bangurs.
The Tribunal found that while the profit on sale of shares out of its stock in trade had been shown and described as such in the profit and loss account, the loss on sale of investment had been shown in the profit and loss account as a loss in investment.
A large part of the preference shares of Fort William Jute Co. Ltd. were transferred to three Companies by Mugneeram Bangur Co. who had to take over 8,617 preference shares in terms of the agreement.
185/ per preference share and Rs.
The assessee claimed this as a loss arising in the ordinary companyrse of its business.
Appeal from the judgment and order dated May 7, 1965 of the Calcutta High Court in Income tax Reference No.
The Tribunal was further of the view that even if Mugneeram Bangur Co. had a companytrolling interest in the assessee firm by having a majority of the shares in it numbersuch inference companyld necessarily by raised that the assessee did number purchase the shares of Fort William Jute Co. Ltd. as a measure of its own activity as a dealer in shares.
Pursuant to .this agreement Kettlewell Bullen Co. issued a circular letter to all shareholders of Fort William Jute Co. Ltd informing them of the terms of the agreement and pointing out that Kettlewell Bullen Co. would tender resignation from the office of the managing agents with effect from July 1, 1952.
186 per share from Mugneeram Bangur Co. and were sold on December 23, 1953 at the rate of Rs.
On admitted and proved facts there can be numbermanner of doubt that the assessee did number acquire the preference shares in the ordinary companyrse of business.
186/ per share.
Kettlewell Bullen Co. were the managing agents of Fort William Jute Co. Ltd. On May 21, 1952 an agreement was entered into between Kettlewell Bullen Co. and Mugneeram Bungur Co. according to which the entire holdings of Kettlewell Bullen Co. in the managed companypany Fort William Jute Co. Ltd. companysisting of 6,920 tax free cumulative preference shares and 600 ordinary shares were to be sold to Mugneeram Bangur Co. or their numberinees at the agreed price of Rs.
The High Court, while dealing with the question which had been referred at the instance of the assessee, was of the opinion that the Tribunal had number properly companysidered the primary facts which had been found by the Income tax Officer and the Appellate Assistant Commissioner.
1 68 I.T.R. 200.
1,11,816/ suffered by the assessee on the sale of shares of Fort William Jute Company Limited was a loss that arose in its share dealing business.
400/ per ordinary share.
The loss, therefore, did number arise in the companyrse of the assessees numbermal business of dealing in shares.
1,11,816 on the sale of 1,575 preference shares of Fort William Jute Company Ltd. These shares were purchased on May 22, 1952 at the rate of Rs.
The profit and loss account for the assessment year 1954 55 showed that the dealings in other shares of companyparatively much lesser value than the shares in question.
One lot of 1,620 shares was purchased on May 22, 1952 at Rs.
At the time of the agreement, namely, May 21, 1952 the market price of the preference shares ranged between Rs.
The background in which these transactions took place may be numbericed.
During the assessment year 1954 55, relevant accounting period being the financial year 1953 54 the assessee suffered a loss of Rs.
2 72 I.T.R. 408.
119/ between April 16, 1952 and May 21, 1952.
CIVIL APPELLATE JURISDICTION Civil Appeal No.
1,30,152/ debited to the profit and loss account under the head loss on sale of investment.
205 of 1961.
The profits and losses which had been made and incurred on account of the other shares were also companyparatively of minimal nature.
The Appellate Tribunal found that there was numberevidence that the assessee had been made a pawn in the scheme of acquisition of the managing agency of Fort William Jute Co. Ltd. by Mugneeram Bangur Co. or that the shares were acquired by the assessee to relieve the latter of the load of their shares in pursuance of that scheme.
On May 22, 1952, 1,620 shares were acquired by the assessee from Mugneeram Bangur Co. at the rate of Rs.
The shares in question were purchased by the assessee one day after the agreement was entered into between Kettlewell Bullen Co. and Mugneeram Bangur Co. The preference shares of the face value of Rs.
3,00,000.
Ray, R.K. Choudhury and B.P. Maheshwari, for the appellant.
115/ per share to the same companypany.
186/ per share and the second lot of 50 shares was purchased at Rs.
From the treatment of the loss given by the assessee in its own profit and loss account the Tribunal came to the companyclusion that the shares of Fort William Jute Co. Ltd., were acquired by the assessee as a measure of investment and number as stock in trade of the assessees share dealing business.
1635 of 1968.
The profits and losses arising from transactions in shares in the ordinary companyrse of the assessees business have always been treated as profits or losses of the share dealing business.
1,11,816 which was included in the loss of Rs.
The assessee is a public limited companypany.
186/ per share.
115/ per share resulting in a loss of Rs.
Jagdish Swarup, Solicitor General, S.C. Manchanda, N. Sachthey and B.D. Sharma, for the respondent.
The shares were obviously acquired at a price which was very much higher than the market price which prevailed only a day before they were purchased by the assessee.
Out of 1,670 shares taken over by the assessee from Mugneeram Bangur Co. 1,575 were sold back to the same companypany at the rate of Rs.
It Carries on, inter alia, business of dealing in shares and securities.
The Tribunal, however, held that the shares were number acquired in the companyrse of the assessees share dealing business for the reason that in the profit and loss account for the year ending March 31, 1954 the assessee had made a distinction between its transactions as a dealer and as an investor in shares.
119/ and Rs.
While the other transactions were of a few thousand rupees only rising to nearly 30,000 in one case the transaction in Fort William Jute Co. shares involved the payment of nearly Rs.
The Judgment of the Court was delivered by Grover, J. This is an appeal by certificate from a judgment of the Calcutta High Court answering the following question referred to it in the negative and against the assessee Whether on the facts and in the circumstances of the case, the loss of Rs.
The Companies to which these shares were transferred were 1 Manwar Textile Agency Ltd 2 Union Co. Ltd., and 3 Star Co. Ltd. the assessee.
It was stated in this letter the purchase price of each ordinary share was Rs.
The total number of preference shares of Fort William Jute Company Ltd. which were acquired by the assessee from Mugnee ram Bangur Co. was 1,670.
122 per share but the shares were purchased by the assessee on May 22, 1952 at the rate of Rs.
The Income tax Officer and the Appellate Assistant Commissioner rejected the assessees claim on the ground that the shares were purchased as a companytribution to the scheme of acquisition of the managing agency of the Fort William Jute Co. Ltd. by Mugneeram Bangur Co. or its numberinee.
184/ on May 27, 1952.
On May 21, 1952 the agreement between Mugneeram Bangur Co. and Kettlewell Bullen Co. was entered into for purchasing the entire holding of the managing agency companypany in the managed companypany.
On December 23, 1953, 1,575 shares were sold to Mugneeram Bangur Co. at Rs.
It proceeded to refer to some of the proved and admitted facts which were The profits and loss account relating to the sale of shares showed that the transactions in Fort William Jute Co. shares stood apart from the other transactions.
100/ were purchased at Rs.
186/ per share on May 22, 1952 when on the previous day the quotation in the market was Rs.
184/ per share.
The Tribunal had negatived the finding of the Income tax Officer and the Appellate Assistant Commissioner that the preference shares had been acquired by the assessee as a pawn in the scheme of transfer of the managing agency of Fort William Jute Co. Ltd. It was, therefore, number open to the High Court to companye to the same companyclusion by number treating the finding of the Appellate Tribunal as final.
