1957 (3) TMI 54 - HC - Income Tax

Court rules share sale not taxable as revenue receipt. Assessee awarded costs of Rs. 300.

The court ruled against the Department, determining that the purchase and sale of shares were not a venture in the nature of trade. Therefore, the income ... - Issues Involved:1. Whether the purchase of 100 shares of Straw Board Mills Ltd. in 1940 and their subsequent sale was a venture in the nature of trade.2. Whether the income from the sale of these shares was a revenue receipt taxable in the hands of the applicant.Detailed Analysis:1. Venture in the Nature of Trade:The primary issue was whether the purchase and subsequent sale of 100 shares of Straw Board Mills Ltd. by the assessee constituted a venture in the nature of trade. The Tribunal's findings included several points:- The Tribunal was not convinced that the shares were purchased to qualify for directorship.- The Tribunal did not accept that the shares had to be sold because the purchaser of Jaswant Sugar Mills required the shares of Straw Board Mills Ltd. to be included in the sale.- The Tribunal believed the shares were purchased when a dividend was imminent, suggesting a motive to sell at a profit.- The Tribunal noted that the assessee's father, who managed Straw Board Mills Ltd., had a significant number of shares which could have been transferred to the assessee if qualifying shares were the goal.- The Tribunal observed that the assessee had previously purchased shares for profit, indicating a pattern of trading.However, the court found that these points did not adequately address the core question of the assessee's intent at the time of purchase. The court emphasized that the Tribunal's rejection of the assessee's affidavit, which claimed the shares were bought as an investment, was unjustified since the assessee was neither cross-examined nor asked to provide additional evidence. The court cited the Supreme Court's decision in Mehta Parikh and Co. v. Commissioner of Income-tax, which held that affidavits should not be dismissed without proper examination.2. Revenue Receipt Taxable:The Tribunal had concluded that the profit from the sale of shares was taxable as revenue income. The court, however, disagreed, stating that the Tribunal's findings did not support the inference that the purchase was a speculative venture. The court noted that the assessee's explanation that the shares were sold under special circumstances (the purchaser's condition for buying Jaswant Sugar Mills) was credible and unchallenged.The court also addressed the Tribunal's reliance on the assessee's other share transactions. It pointed out that not all purchases were for speculative purposes, as evidenced by the investment in Amrit Banaspati Company Ltd., which the Tribunal accepted as a genuine investment. The court concluded that the subsequent trading activities did not reflect the assessee's intent in 1940.Conclusion:The court answered the question in the negative, stating that the Tribunal was not justified in inferring that the purchase and sale of the shares were a venture in the nature of trade. Consequently, the income from the sale was not taxable as revenue receipt. The assessee was awarded costs of Rs. 300 from the Department.