TMI Blog1967 (11) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... find out from the statement of the case whether the Tribunal accepted the explanation of the assessee that, in the previous year relevant to the assessment year 1953-54, the control of McLeod and Co. Ltd. went out of the hands of the directors of the assessee and it was for this reason that the assessee sold the shares of McLeod and Co. It was also pointed out further that the Tribunal had not stated what was the object of the assessee in buying 6,900 ordinary shares of McLeod and Co. It appeared from the order of the Income-tax Officer that these shares were purchased in a number of lots from the year 1948 to 1950, and it was also not stated as to what was the object in buying other securities, and why did the assessee confine its activities mostly to the shares of McLeod and Co. Ltd., and the companies managed by McLeod and Co. Ltd. It was in the light of these omissions that the Tribunal was asked to send a supplementary statement. That supplementary statement has now been received and the answer to the question has to be given on the basis of the facts contained in the original statement of the case as well as this supplementary statement. The relevant facts which emerge out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rector, but the resignation had not yet been accepted by the Government. It has also been found that Sri C. L. Bajoria acquired 12,440 shares in all, including 6,900 shares purchased from the assessee ; but there was no material on the record to prove that his group obtained a controlling interest in McLeod and Co. Ltd., as a result of acquisition of these shares. As a fact, it was held that, after the resignation of Sri C. L. Kanoria, Messrs C. L. Bajoria and Baijnath Jalan, both of M/s. Soorajmull Nagarmull, became directors of McLeod and Co. Ltd. These are the principal facts on the basis of which it has to be determined whether the sale of these shares by the assessee resulted in a revenue receipt or in a capital gain. It appears to us that the facts and circumstances in this case can lead to no other conclusion except that these shares were purchased and sold by the assessee with the motive of earning a profit by such purchases and sales and not with the object of investing its capital in these shares in order to derive income from that investment. It is true that the principal business of the assessee was to invest capital and to derive income from dividends on shares and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... falling and the return on investment was not at all substantial while loans had been taken to purchase these shares strongly points to a conclusion that the shares could not have been purchased as an investment to earn income from dividends and that the purchases of these shares were with the object of selling them subsequently at a profit. The shares were, in fact, sold at considerable profit subsequently and that is how the question of charging that profit to tax as revenue receipt has arisen. The explanation sought to be given by the assessee that the shares were, in fact, being held as investment and were sold simply because the control of McLeod Co. Ltd. went out of the hands of the directors of the assessee has not been proved, according to the supplementary statement of the case submitted by the Tribunal. In fact, the Tribunal was not satisfied that even the purchasers, viz., the Bajoria group, on buying these shares from the assessee acquired a controlling interest in McLeod Co. Ltd. or in the companies managed by that company. The object of the sale as given by the assessee has, therefore, remained unproved, whereas the fact that the purchases of the shares were made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses of shares of McLeod Co. Ltd. were not for the purpose of keeping controlling interest in that company or for investment, but that the shares were being purchased and sold for earning profit, so that the transactions were an adventure in the nature of trade in these shares of McLeod Co. Ltd. In this connection, Mr. A. K. Sen, learned counsel for the appellant, drew our attention to the following view expressed in the remand order : " We are unable to answer the question referred because the mere fact that an investment company periodically varies its investments does not necessarily mean that the profits resulting from such variation is taxable under the Income-tax Act. Variation of its investments must amount to dealing in investments before such profits can be taxed as income under the Income-tax Act. Reliance was also placed on the observation of this court in Bengal and Assam Investors Ltd. v. Commissioner of Income-tax which were quoted in the remand order and are as follows : " It seems to us that, on principle, before dividends on shares can be assessed under section 10, the assessee, be it an individual or a company or any other entity, must carry on busi ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
