TMI Blog1979 (1) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... vate limited company which will hereinafter be referred to as " the assessee-company ". It carries on several types of businesses and activities, but one of these is share-dealing. On 31st August, 1954, the assessee-company purchased 900 shares of Hind Tobacco Cigarette Co. Ltd., which company will be hereinafter referred to as " the tobacco company ". The tobacco company was established in 1951, and of its 10,934 equity shares, Pannalal Bansilal Pittie and his two sons, Badrivishal and Laxmilal, held 1,715 shares each, all the three between them held in all 5,145 shares. Although the tobacco company was a public limited company, its shares were not quoted on the market. The tobacco company went into production in 1954. However, it soon r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regular dealer in shares. On the basis of these facts it was submitted to the ITO that the loss written off should be allowed as a revenue loss. It was also pointed out to the ITO that in the assessment year 1952-53, the company had made some profit on the sale of certain shares and that this profit had been taxed as its business income. The company further urged that in the assessment year 1953-54, there was a loss on account of shares of another company held by the assessee-company. But this loss was not allowed only because it was not written off in the assessment year under consideration. A similar loss was claimed in the assessment year 1955-56, for which year Rs. 11,200 had been written off by the assessee-company on account of losses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares appeared to have been purchased only with a view to accommodate an allied concern of the assessee-company, viz., the firm of M/s. Raja Bahadur Sir Bansilal Sons of Hyderabad. Accordingly the ITO refused to treat the loss either as a revenue loss or as a loss under the head " Capital gains ". The assessee-company appealed to the AAC, but this appeal proved unsuccessful. The AAC reiterated in his order the various facts initially expressed by the ITO and on these facts approved of the conclusion of the ITO. In his view, the shares of the Tobacco company were not acquired by the assessee-company for trading purposes. In his order, the AAC listed the prominent shareholders and the members of the board of directors of the assessee-co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny carried the matter in second appeal before the Tribunal. No arguments were addressed to the Tribunal on the question of the loss being allowed as a loss on the transfer of a capital asset within the meaning of s. 45 of the Act. The only ground argued was that the loss was allowable as a revenue loss. Counsel appearing on behalf of the assessee-company referred to the treatment of the company as a dealer in shares in past assessments ; he also referred to the exhibition of the shares under " current assets " in the balance-sheets which were prepared after the Companies Act, 1956, came into force. In the balance-sheets the shares purchased were shown at cost. It was contended that when it was realised that nothing would be recovered from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in shares must only deal with shares of a public limited company in which he has no other interest. The Tribunal also considered that the price of Rs. 100 per share paid was a bona fide price and not a dictated price or an arranged price. In its view at the time of the purchase, there were good prospects for the tobacco company and there was no reason to be pessimistic about its working in future. The fact that the break-up value of the shares progressively deteriorated in the following years cannot retrospectively make the price paid in 1954 an artificially inflated price. The Tribunal found that after the shares of the tobacco company were acquired by the assessee-company, they were held like the other shares which have been accepted by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count but for different considerations. This may be one of the factors which were required to be considered but cannot by itself be a decisive factor as contended for by Mr. Joshi. Further, it would appear to us that the conclusion reached by the Tribunal that the price paid was not an inflated or a dictated one or an arranged one is correct, particularly when it is realised that the latest available balance-sheet was the one as on 31st March, 1953, which gave the break-up value of the shares of the tobacco company at Rs. 99.77. In retrospect, after the lapse of many years, it may be possible to say that the break-up value was only Rs. 50 or Rs. 60 at the time of the purchase of the shares. This, however, will not be a fair method of ascert ..... X X X X Extracts X X X X X X X X Extracts X X X X
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