TaxTMI 
TaxTMI 
1954 (11) TMI 3
X X X X Extracts X X X X
X X X X Extracts X X X X
....ellant company's memorandum of association and articles of association and on a consideration of the circumstances in which the shares of the Sarswati Sugar Syndicate were purchased and sold, it could be held that the purchase and sale of such shares was a part of the appellant company's business activities and was a business deal ? (2) Whether in the circumstances of the case, the excess of Rs. 20,000 realised in the assessment year 1942-43 and Rs. 2,26,700 in the year 1944-45 was a revenue receipt chargeable to tax, under section 3 of the Income-tax Act and was not a mere appreciation of capital ? The questions arose in the following circumstances : The assessee, a public lmited company, which is the appellant before us, was formed in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rd mill of the sugar company--not in existence at the time but expected to be erected in 1933---when such mill was erected, on the same terms as given by the sugar company to other managing agents of their two other existing mills. The investment of Rs. 5,00,000 by the assessee-company was made conditional on the sugar company receiving other applications for shares to the tune of at least Rs. 7,00,000. It was further agreed that if the third mill was not erected then the sugar company was to pay to the assessee-company Rs. 15,000 as commission upon the moneys invested by them in shares. There was subsequently a modification to the effect that the assessee-company would themselves subscribe to shares worth Rs. 3,00,000 and the remaining sha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....:---- "Any receipt not being capital gains chargeable according to the provisions of section 12B and not being receipts arising from business ..................... which are of a casual and non-recurring nature .........." Admittedly the first portion of this clause does not apply to the case for the shares were purchased before the period mentioned in section 12B. It was also agreed that the two receipts were of a casual and non-recurring nature and this fact is noticed by the High Court in their judgment. The only question for consideration therefore is whether it is a receipt from business and not a mere appreciation in capital. An argument was put forward at one stage on behalf of the revenue that the assessee-company, by virtue o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r the adventure. We think that in so holding the High Court fell into an error. The exact nature of the business which the assessee-company was doing is admittedly not clear from the record but it is not denied that the memorandum of association of the assessee-company did not authorise it to purchase and/or sell shares as dealers nor is it denied that beyond this isolated transaction of purchase and sale the assessee-company did nor deal in shares. It seems that the object of the assessee-company in buying shares was purely to obtain the managing agency of the third mill which no doubt would have been an asset of an enduring nature and would have brought them profits but there was from the inception no intention whatever on the part of t....