TaxTMI 
TaxTMI 
1960 (12) TMI 12
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....of the late Maharajadhiraja of Darbhanga and the brother of the present Maharaja. The father died in 1929 and the appellant was given by way of maintenance the Estate of Rajnagar. He was also given a yearly allowance of Rs. 30,000 which was later raised to Rs. 48,000. From 1929, the appellant invested his cash surplus in shares and securities, the account of which was entered in what is called Account Book No. 1. From the year 1930 onwards up to the year 1941-42 the appellant purchased a large number of shares and securities which by the accounting year 1941-42 were of the value of Rs. 14.91 lakhs. During this period the appellant sold shares and securities in the accounting years 1936-37 and 1939-40 of the value of 1.48 lakhs and 1.69 lakh....
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....nt was opened in the books of the appellant named No. 2 Investment Account which contained all entries in regard to shares purchased and sold from out of the money borrowed from the Maharajadhiraj. In this account entries of the different years were as follows : Total value of Total cost of shares Total cost of shares and Year shares and securities and securities pur- securities sold during the at cost at the begin- chased during the year ning ofthe year year 1347F. Nil Rs. 6.05 lakhs Nil ---------- (8 items) 1939-40 1348F. Rs. 6.05 lakhs Rs. 6.21 lakhs Rs. 1.78 lakhs ----------- (32 items) (1 item) 1940-41 1349F. Rs. 10.47 lakhs Nil Nil ---------- 1941-42 1350F. Rs. 0.24 lakhs Rs. 3.60 lakhs ----------- Rs. 10....
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....9 ... Rs. 76,000 and odd The Income-tax Officer held these to be liable to income-tax as business profits. On appeal, the Appellate Assistant Commissioner excluded the profits for the years 1944-45 and 1945-46 but for the years 1946-47 to 1948-49 the assessments were upheld. Both parties appealed to the Appellate Tribunal. It held on the evidence that the appellant was to be regarded as a dealer in shares and securities and, therefore, the profits were assessable to income-tax. The appellant applied for a case to be stated under section 66(1) of the Income-tax Act. This application was dismissed but the High Court made an order under section 66(2) of the Income-tax Act to state a case on two questions of law, The questions were as follows....
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.... in buying the shares and whenever he found it profitable he converted his holdings and securities and for a number of years from 1931-32 he had been buying shares but he did not sell them ; that the very nature of investments was such that they had to be constantly changed so that the monies invested may be used to the best advantage of the investor; and that the sales were really for the purpose of re-employing the monies that he had invested to his best advantage. Counsel for the appellant relied upon certain cases in support of his submission that the first question raised was of a wider amplitude and that it had, been erroneously restricted by the High Court and that its true import was the same as of the questions which were raised in....
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....but that was also a rebuttable presumption. The purchase, in the absence of any rebutting evidence was held to fall in the latter category, i.e., adventure in the nature of trade. In the Oriental Investment case the assessee was an investment company. It had purchased certain shares and sold them and qua those shares it claimed to be treated as an investor and not a dealer on the ground that it did not carry on any business in the purchase and sale of shares. The assessee's applications for reference to the High Court were rejected on the ground that no question of law arose out of the order of the Tribunal. It was held that the question whether the assessee's business amounted to dealing in shares and in properties or was merely an investm....
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....ary to discuss these cases because the principle applicable to such transactions is that when an owner of an ordinary investment chooses to realise it and obtains a higher price for it than he originally acquired it at the enhanced price is not a profit assessable to income-tax but where, as in the present case, what is done is not merely a realisation or a change of investment but an act done, in what is truly the carrying on of a business the amount recovered as appreciation will be assessable. In July, 1940, the appellant had borrowed, though without interest, a large sum of money to the extent of about Rs. 10,00,000, no doubt, from his brother. He started a new account calling it No. 2 Investment Account. For the assessment years unde....