TaxTMI 
TaxTMI 
1965 (2) TMI 137
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....pany. Under clause (1) of the managing agency agreement dated February 6, 1942, the assessee-firm had been appointed as the managing agents of the company for a period of thirty years, subject to the condition that it shall continue to hold the company's shares of not less than O. S. Rs. 1,00,000. The assessee-firm purchased 2,000 shares of O. S. Rs. 50 each in February, 1942, and 4,000 more shares of O. S. Rs. 50 each in June, 1946. In 1956, it brought down the value of the 6,000 shares to I. G. Rs. 1,80,000 and wrote off the loss against the reserves of its accumulated profits. In 1958, capital reduction of the company was effected with the permission of the Andhra Pradesh High Court and the paid-up value of each share was reduced fro....
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.... assessee-company sold the shares of the sugar company at a profit of about Rs. 2 lakhs. The Income Tax authorities, the Tribunal and the High Court treated the profit as revenue receipts. This was reversed by the Supreme Court and their Lordships held that the profit was appreciation of capital. His Lordship Mahajan C.J. observed at page 53 that the assessees object in buying the shares was purely to obtain the managing agency which would have been an asset of an enduring nature, that the purchase of the shares was an investment and not an adventure and that the profit realised by the sale of the shares was, therefore, not in the nature of income from business. The case of Commissioner of Income Tax v. Ramnarain Sons Ltd. was unsuccessfull....
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....held that this loss as result of the misappropriation was an admissible deduction in computing the appellants profits under section 10(1) of the Income Tax Act because it was incidental to the carrying on of the appellants business. His Lordship Venkatarama Iyer J. observed that profits and gains, which are liable to be taxed under section 10(1), are what are understood to be such according to ordinary commercial principles, that section 10(2) is not exhaustive of items admissible as deductions and said at page 16 : "At the same time, it should be emphasized that the loss for which a deduction could be made under section 10(1) must be one that springs directly from the carrying on of the business and is incidental to it and not any....
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....a revenue loss was put forward but was negatived by the Supreme Court in Ramnarain Sons (Pr.) Ltd. v. Commissioner of Income Tax. His Lordship Shah J. said at pages 538 and 539 : "The managing agency is manifestly the source of profit of the appellants; but the shares purchased and the managing agency acquired were both assets of a capital nature and did not constitute stock-in-trade of a trading venture..... Subsequent disposal of some out of the shares by the appellants could also not convert what was a capital acquisition into an acquisition in the nature of trade..... If the acquisition of the shares was not acquisition of a stock-in-trade, but of a capital asset, the appellants, by valuing the shares at cost or market....