1967 (12) TMI 12

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....946, the assessee, which was also a company incorporated in February, 1946, became the managing agents of Loyal Textile Mills under an agreement for the purpose entered into on April 17, 1946. During the year ended April 30, 1947, the assessee acquired 320 ordinary shares and 250 preference shares of Loyal Textile Mills. On October 10, 1947, the assessee made a further acquisition of 39,000 deferred shares for a total consideration of Rs. 39,000. In 1954, the assessee agreed to make over its managing agency to Karamutha Thiagaraja Chettiar in terms of a letter dated September 16, 1954, addressed by A. V. Thomas, a director of the assessee-company. The terms included that Thiagaraja Chettiar should take over the deferred shares at Rs. 5 per ....

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.... 1955. They have also found that no dividends were at any time declared on the deferred shares. They are all of the view that, in view of these facts, the assessee took the opportunity of making a profit, when there was the offer to purchase the managing agency as well as the deferred shares and that it had not been proved by the assessee that its sole object in acquiring these shares was to augment the voting strength of the managing agency company. Before us, the argument for the assessee is that the Tribunal in recording its finding to that effect had misdirected itself, mixed up the facts and failed to judge the nature of the transaction of purchase and sales separately in the light of their own merits. Possibly, there is some force ....

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.... shares. But, in the case before us, the facts do not show that the assessee in acquiring the deferred shares had a similar intention of winning controlling power. As we noticed at the outset, the total number of shares which the assessee had acquired by October 10, 1947, were only 39,570, while the number of shares issued by Loyal Textile Mills amounted to 1,18,412. Nor does it appear that when the assessee purchased the deferred shares, they did so at a higher price than the then market rate. It is also significant that if the intention in purchasing the shares was as stated by the assessee, it made no effort to acquire more shares with a view to give effect to that intention subsequent to October 10, 1947. It purchased no further shares ....