Fixed assets treatment of investment shares under section 23A turns on commercial character, not yearly value fluctuations.

Shares held as investments, and not as stock-in-trade, may qualify as fixed assets for section 23A of the Indian Income-tax Act, 1922. The term "fixed assets" was read in its commercial sense by distinguishing them from current assets, with support from accountancy and company-law usage. Year-to-year fluctuation in share value did not alter that character, because fixed assets may also vary in value. The view that only an investment company could treat such shares as fixed assets was rejected, and the shares were treated as fixed assets within Explanation 2(iv)(a), making section 23A inapplicable.

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Issues: Whether shares held by the assessee in the managed company formed part of its fixed assets so that section 23A of the Indian Income-tax Act, 1922, was inapplicable for the assessment year 1955-56.

Analysis: The shares were found as a fact to have been held as investments and not as stock-in-trade. The expression "fixed assets" was construed in its commercial sense by reference to the distinction between fixed assets and current assets, as recognised in standard accountancy and company-law texts and in the balance-sheet format under the Companies Act, 1956. The fact that the value of the shares fluctuated from year to year did not prevent them from being fixed assets, because other admitted fixed assets may also increase or diminish in value. The contention that only an investment company could treat such shares as fixed assets was rejected.

Conclusion: The shares constituted fixed assets within Explanation 2(iv)(a) of section 23A of the Indian Income-tax Act, 1922, and section 23A was therefore inapplicable. The question was answered in the affirmative and in favour of the assessee.

Ratio Decidendi: Shares held as investments, and not as stock-in-trade, may constitute fixed assets for the purpose of section 23A, and the mere fact of year-to-year fluctuation in their value does not deprive them of that character.

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