1966 (3) TMI 1

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.... investment and not as a stock-in-trade and that the loss incurred thereon was a capital loss is, in law, justified ?" The material facts as disclosed in the statement of the case are these : The assessment year is 1953-54, the relevant accounting year being 1952-53 ending on March 31, 1953. The assessee is a company incorporated in the year 1948, with several objects set out in the memorandum of association, including those mentioned in clause 16 thereof, which reads: "To invest and deal with the moneys of the company, and in particular to subscribe for or otherwise acquire and to hold and deal with the perpetual or redeemable/debentures or debenture-stock or obligation or the shares, fully or partly paid, or stock of any company in ....

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....stion, not being a normal business venture but being one " of a casual and capital nature ", resulted in loss of capital. The Appellate Assistant Commissioner too disallowed the claim, holding that the assessee-company was not a dealer in securities, on the following grounds : (i) The company had, from the time it commenced business seven years ago in 1948, effected sales of securities only in the account year 1952-53. (ii) In other years, securities were only redeemed and not sold, showing that the company was an investor and not a dealer in securities. (iii) In the balance-sheets, the securities were shown as investments. They were not valued at the market rates, which were less. (iv) Transactions of sale of securities were no....

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....dicate that the transaction in this case was an adventure in the nature of trade. It is, however, argued that merely because the assessee had valued the securities at cost and not at the lower market rates, it could not be concluded that they were investments and not the assessee's stock-in-trade. In a matter like this, so it was contended, all that can be insisted upon is adherence to a regular basis of valuation and the assessee is free to adopt his own method of accounting. This is undoubtedly correct and yet, in considering whether the securities were stock-in-trade of an adventure in the nature of trade, it cannot be ignored that the generally accepted and established rule of commercial practice and accountancy is that anticipated loss....

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....sing its holdings when finances were needed is part of the normal business of the company. . . There is ample evidence to show that the company did in fact carry on the business of financiers, which is one of the objects mentioned in clause 3(1) of the memorandum of association. The evidence pertaining to the financial transactions of the company, during the relevant accounting years, to which we have referred, clearly establishes that the realisation of profits on investment is directly referable to the carrying on of the company's business as financiers." On those conclusions, the Supreme Court observed : "The principle applicable in all such cases is well-settled and the question always is whether the sales which produced the surpl....