TaxTMI 
TaxTMI 
1969 (2) TMI 39
X X X X Extracts X X X X
X X X X Extracts X X X X
...., Messrs. Anderson Wright Ltd. purchased all the shares of Mrs. Flora Meyer at a price of Ks. 300 per share. The total price thus came to over a crore of rupees which Messrs. Anderson Wright Ltd. raised by borrowings from various parties including a sum of Rs. 27,54,000 from the assessee-company. There is a resolution by the board of directors of the assessee-company sanctioning loan dated 15th February, 1951, and under this very resolution the directors of the assessee-company also authorised the assessee-company to be a dealer in shares with retrospective effect from 17th July, 1950. Up to and including the assessment year 1951-52 the assessee had not been dealing in shares but held shares only as investment. The memorandum of association of the assessee-company, however, authorised dealing in shares. The amount of loan advanced by the assessee-company as mentioned hereinbefore to Anderson Wright Ltd. in purchasing shares of Khardah Co. Ltd. was repaid by Anderson Wright Ltd. The major portion of the shares of Khardah Co, Ltd. came to be owned between Anderson Wright Ltd. and the assess-company both of which were under the control of Kedia family, For the assessment year 1952-53 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....een described as sister concerns indicating thereby concerns in which the members of the Kedia family had substantial interest. It also appears from the said particulars that these shares were purchased in different quantities on diverse dates between 18th September, 1950, and May, 1951. They were purchased from several parties. Some were purchased at rates lower than the prevailing market rates on the relevant dates. Out of this purchase of 13,518 shares of Khardah Co, Ltd. 335 of these shares were sold during the relevant assessment year. Out of these sales about 20 shares were sold to Hindustan General Produce Co. Ltd., which is also a concern in which the members of the Kedia family had substantial interest. The Income-tax Officer has dealt with how the money was obtained by Anderson Wright Ltd. for the purpose of acquiring these shares and how the assessee got this money for the purpose of acquisition of these shares. It appears that the said shares were acquired with borrowed money. The Income-tax Officer has also referred to the fact that Mrs. Meyer had substantial interest in the said company and she was unloading those shares and if those shares went out of the Dedia famil....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of Anderson Wright Ltd. and ordered deletion of the profits on sale of shares of Khardah Co. Ltd. The Tribunal in that appeal did not agree with the finding of the Appellate Assistant Commissioner and held that acquisition of shares was not with a view to safeguard the managing agency of Khardah Co. Ltd. but was with a view to earn profits by dealing in shares. So it appears that the acquisition of these shares by Anderson Wright Ltd. was held to be for dealing in shares. It was argued that when the managing agents of Khardah Co. Ltd. had not been held as investors in shares of that company but as dealers in shares of Khardah Co. Ltd., it would be meaningless to imagine that the assessee-company who had some interest in the managing agency company had acquired the shares of Khardah Co. Ltd. with a view to acquire controlling interest in the Khardah Co. Ltd. while the acquisition by the managing agents themselves have been held to be dealing in shares. The Appellate Assistant Commissioner accepted the said argument. The Appellate Assistant Commissioner, in those circumstances, allowed the claim for losses in respect of those share dealings for the said years. There was a further....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s of Kedia family were interested. These shares therefore were already in the family. Therefore retention or acquisition of control of Khardah Co. Ltd. by members of Kedia family could not have been the purpose for acquisition of these shares. The Tribunal has also referred to the manner in which these shares were acquired, that is to say, in different quantities. The Tribunal has also referred to the fact that these were acquired with the borrowed money. The Tribunal therefore dismissed the appeals. The Tribunal has referred to this court the following questions under section 66 (1) of the Indian Income-tax Act, 1922 : " (1) Whether, on the facts and in the circumstances of the case, the assessee had been rightly held to be a dealer in respect of the shares of Messrs. Khardah & Co. Ltd. and the assessee's claim for the losses of Rs. 9,29,485 and Rs. 66,040 had been rightly allowed for the assessment years 1952-53 to 1955-56 ? (2) Whether, on the facts and in the circumstances of the case, transfer charges of Rs. 3,684 and Rs. 3,387 incurred for acquiring the shares of Khardah Co. Ltd. were properly allowed as revenue expenditure for the assessment years 1952-53 and 1953-5....
X X X X Extracts X X X X
X X X X Extracts X X X X
....asing the shares was not to acquire them as part of the stock-in-trade of its business in shares. The loss incurred by the sale of these shares was therefore loss of a capital nature. The Supreme Court was further of the opininon that, in considering whether a transaction is or is not an adventure in the nature of trade, the problem must be approached in the light of the intention of the assessee having regard to the legal requirements which are associated with the concept of trade or business. The inference on this question raised by the Tribunal on the facts found is of mixed law and fact and is open to challenge before the High Court on a reference under section 66 of the Income-tax Act. The question whether the assessee's transactions amounted to dealing in shares and properties or in investment, is a mixed question of law and fact and the legal effect of the facts found by the Tribunal on which the assessee could be treated as a dealer or an investor, is a question of law. It is, however, significant to note that in that case it was found by the Supreme Court that the purchase of the shares was to facilitate the acquisition of managing agency of the company. In those circumsta....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n the relevant assessment year the shares were purchased with borrowed money, both the purchases and sales were at the prevailing market rate and one of the objects of the assessee-company was to carry on business in dealing in shares. The Tribunal came to the conclusion that it was a trading loss in dealing in shares. This court did not find it possible to interfere with the said finding of the Tribunal. Dr. Pal also relied on the decision of this court in the case of Ashoka Viniyoga Ltd. v. Commissioner of Income-tax, where this court observed whether the loss incurred in dealing in shares is a trading loss or a loss in investments is a mixed question of law and fact. The Tribunal had come to the conclusion that loss incurred by the assessee was not a trading loss. This court observed, if on the available facts it could not be said that the conclusion arrived at by the Tribunal was perverse in the sense that the conclusion had been arrived at on a view of the facts which could not reasonably be entertained, such conclusion could not be challenged on the ground that it was based on misappreciation of evidence. In the case of Raja Bahadur Visheshwara Singh v. Commissioner of Inc....