Tribunal findings of fact and capital gains treatment upheld where shares were acquired for control, not stock-in-trade.

In a reference under section 66(2), the High Court could not disturb the Tribunal's finding of fact unless it was unsupported by evidence, rested on irrelevant material, or was perverse; the Tribunal's conclusion that the shares were acquired to obtain managing agency and control, and not as stock-in-trade, was supported by relevant circumstances and stood. On that factual basis, the later sale of part of the shares did not change their capital character, and the resulting surplus was not business income under section 10 but was chargeable as capital gain under section 12B.

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Issues: (i) Whether the High Court, in a reference under section 66(2), could interfere with the Tribunal's finding of fact that the shares were purchased to acquire the managing agency and control of the company and were not stock-in-trade. (ii) Whether, on that finding, the profit from sale of the shares was chargeable as capital gain under section 12B.

Issue (i): Whether the High Court, in a reference under section 66(2), could interfere with the Tribunal's finding of fact that the shares were purchased to acquire the managing agency and control of the company and were not stock-in-trade.

Analysis: In a reference under section 66, the High Court is not a court of appeal on facts. It may interfere only where the Tribunal's conclusion rests on no evidence, irrelevant material, conjecture, or a finding so unreasonable that no judicially instructed person could reach it. The Tribunal had relied on relevant circumstances, including the origin of the shares in the Sassoons' block, the transfer at the original price, and the assessee's proportionate entitlement in the purchase arrangement. No ground for judicial interference with the factual finding was shown.

Conclusion: The Tribunal's finding was supported by relevant material, and the High Court was not justified in disturbing it.

Issue (ii): Whether, on that finding, the profit from sale of the shares was chargeable as capital gain under section 12B.

Analysis: Once the shares were held to have been acquired not as stock-in-trade but as part of a capital acquisition directed towards obtaining the managing agency and control of the company, the later sale of a portion of those shares did not alter their character. The resulting surplus was not business income under section 10. On the admitted footing that the shares were not stock-in-trade, the gain fell within the charging provision for capital gains.

Conclusion: The profit from the sale of the shares was chargeable as capital gain under section 12B.

Final Conclusion: The appeal succeeded, the High Court's answers were set aside, and the Tribunal's view was restored on the nature of the share acquisition, while the resultant surplus remained taxable as capital gain.

Ratio Decidendi: In a reference, a High Court may interfere with a Tribunal's finding of fact only when it is unsupported by evidence or is otherwise perverse; where shares are acquired as part of a capital transaction to obtain control of a company, their subsequent sale does not convert the acquisition into stock-in-trade, and the resulting surplus is capital gain.

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