TaxTMI 
TaxTMI 
TaxTMI 
1949 (1) TMI 3
X X X X Extracts X X X X
X X X X Extracts X X X X
....ny of the Dalmia Group (herein called "the company") of the face value of ₹ 4,00,000. It is conceded that these shares formed part of the stockin-trade of the assessee's share dealing business. The company went into voluntary liquidation as a result of which the liquidator sold up its assets and refunded to its shareholders their subscribed shares of ₹ 15,00,000 and a further sum of ₹ 3,11,328. The aggregate amount was, of course, distributed pro rata among the shareholders. The assessee received as its share a sum of ₹ 4,75,000 in the year of account relevant to 1942-43 assessment and a further sum of ₹ 8,021 in the following year (assessment year 1943-44). The result of the various dealings in shares, securities and debentures appearing from the ledger accounts stands as follows:- Rs. A. P. Rs. A. P. (a) G.P. Notes. Opening stock 5,500 0 0 Sales 17,37,172 0 0 Purchase 17,74,910 14 7 Closing stock 30,000 0 0 17,80,410 14 7 17,67,172 4 8 Loss 13,238 9 11 (b) Debentures. Opening stock 5,00,400 0 0 Sales 5,19,582 15 2 Purchase Nil. Closing stock 400 0 0 5,00,400 0 0 5,19,982 15 2 Profi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r the following year 1943-44, a sum of ₹ 8,021 was added back to the booked profits for precisely the same reasons and the add-back was upheld by the Appellate Assistant Commissioner on appeal on the ground that the sum which constituted a revenue receipt should have been taken to the credit side of the trading account. The assessee preferred two appeals to the Tribunal and these were disposed of by this Bench on the 29th of March, 1946. The detailed reasons in support of the decision are given in our appellate order relating to the assessment year 1942-43 (R.A.A. No. 100-Bihar of 1945-46). While disposing of the appeal relating to the following year the Bench merely adopted the reason given in the main order and did not deal with the matter over again in detail. Both the appeals were dismissed and the two sums of ₹ 75,000 and ₹ 8,021, that were involved in the appeals were treated as revenue receipts. The contention of the assessee was that although the shares of the Stone Suppliers, Limited, at one time formed part of the stock-in-trade of the share business, these cease to be so on the company going into liquidation. It was urged that the shares, on liquidati....
X X X X Extracts X X X X
X X X X Extracts X X X X
...."Whether, in the circumstances of the case, the sums of ₹ 75,000 and ₹ 8,021 constitute revenue receipts assessable to income- tax?" Both parties agree that the question as formulated by us should be referred for the opinion of the High Court. Under Section 66(1) we, therefore refer the following question to the High Court of Judicature at Patna for its opinion:- 66 R.A.A. No. 8 (Bihar) of 1946-47 (Assessment year 1942-43).- "Whether, in the circumstances of the case, the sum of ₹ 75,000 constitutes a revenue receipt assessable to Income-tax?" 66 R.A.A. No. 7 (Bihar) of 1946-47 (Assessment year 1943-44).- "Whether, in the circumstances of the case, the sum of ₹ 8,021 constitutes a revenue receipt assessable to Income-tax?" B. N. Jain and K. P. Varma, for the assessee. S. N. Dutt, for the Commissioner. JUDGMENT MANOHAR LALL, J.- This is a reference under Section 66(1) of the Indian Income-tax Act by the Appellate Tribunal asking for the opinion of the Court upon the following questions:- (1) Whether in the facts and circumstances of the case the sum of ₹ 75,000 constitutes a revenue receipt assessable to incom....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... from realisation or conversion of securities are assessable where what is done is not merely a realisation or change of investment, but an act done in what is truly the carrying on or the carrying out of business: Californian Copper Syndicate v. Harris*. This leading case has been approved by the House of Lords and the Privy Council as pointed out by Viscount Maugham in delivering the judgment of the Judicial Committee in Punjab co-operative Bank Ltd. v. Commissioner of Income-tax** In a later Privy Council case, Kamakshya Narain Singh v. Commissioner of Income-tax, Bihar and Orissa***, known as the "Royalty case," Lord Wright in delivering the judgment similarly observed at page 523: "The profit realised on the sale of shares may be capital if the seller is an ordinary investor changing his securities, but in some instances at any rate it may be income if the seller of the shares is an investment or an insurance company." It cannot be doubted that the assessee had realised its shares for a large sum than what it had paid for acquiring those shares; but as the assessee carries on business inter alia of dealing in shares, the excess profits made must be treate....