Court rules in favor of assessee on shares received, not considered investments under Income-tax Act.

The court considered whether shares received by the assessee were investments made by trustees, affecting the application of section 13(2)(h) of the Income-tax Act. Relying on precedent and consistent views of other High Courts, the court found in favor of the assessee. It concluded that the shares were not investments made by the assessee in companies where the donor had substantial interest, entitling the assessee to the benefits under the relevant sections of the Income-tax Act. The court disposed of the reference accordingly, ruling in favor of the assessee.

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Issues:
Interpretation of section 13(2)(h) of the Income-tax Act in relation to Wealth-tax Act.

Analysis:
The case involved a reference under section 27(1) of the Wealth-tax Act, 1957, regarding the treatment of 50,000 shares of a company, Motor and General Finance Ltd., donated to the assessee by trustees who were also directors of the company. The Wealth-tax Officer contended that the shares were investments made by the trustees, thus disqualifying the assessee from the benefit of section 13(2)(h) read with section 13(3) of the Income-tax Act. However, this view was not upheld by the Commissioner of Wealth-tax and the Income-tax Appellate Tribunal.

The central question for consideration was whether the shares received by the assessee were to be considered as investments made by the trustees, thereby affecting the applicability of section 13(2)(h) of the Income-tax Act. The court referred to a previous case where a similar issue was dealt with, emphasizing that the shares received by the assessee were not investments made by it in companies where the donor had substantial interest, thus entitling the assessee to the benefit of the relevant sections of the Income-tax Act.

The court also noted that similar issues had been addressed by other High Courts, including the Calcutta High Court, which had taken a consistent view on the matter. After hearing arguments from both sides, the court concluded that there was no need to deviate from the precedent set by previous judgments. Consequently, the court answered the question in the affirmative and in favor of the assessee, disposing of the reference accordingly.

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