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TMI Blog1969 (7) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... ully utilised its resources". The Appellate Assistant Commissioner affirmed the decision of the Income-tax Officer. The Income-tax Appellate Tribunal dismissed the appeal filed by the firm. The Tribunal, amongst others, referred the following question to the High Court of Allahabad for opinion : "Whether the surplus realised by the sale of the shares of Aluminium Corporation of India Ltd., J. K. Investment Trust and Raymond Woollen Mills amounting in the aggregate to Rs. 3,99,587 or any part thereof was the revenue income of the assessee liable to tax under the Income-tax Act, 1922 ?" The High Court answered the question in the affirmative. The firm has appealed to this court with special leave. In 1944 the firm purchased 50,000 ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facilitate acquisition of a capital asset being a capital investment, the profit realised by sale of the shares was not liable to be assessed to income-tax. The firm also claimed that when a part of the new issue of capital of Aluminium was not taken over by the public, the firm as financiers of the J.K. Group of Industries took over the shares and the debentures not subscribed within the time allowed. This transaction, it was contended, was also of the nature of capital investment. It was explained that the shares were sold on account of "financial embarrassment" and not with the object of earning income, and the profit realised by the sale did not attract tax. Similar contentions were also raised in respect of the shares of J. K.Trust. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares was a business activity which was continuous", and since the firm "had entered upon a well-planned scheme for earning profit and that in furtherance and execution of that profit making scheme they sold the shares at the opportune time" and that "the sale of the shares was not merely on account of pecuniary embarrassment" as claimed, the profit realised by the firm by the sales of shares could not be characterised as a casual receipt, nor could it be treated as accretion to a capital asset. Strong reliance was, however, placed on a somewhat obscure statement in the order of the Appellate Assistant Commissioner: "In the case of Raymond Woollen Mills shares it is clear beyond doubt that the purchase of the shares was a first rate b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all lot out of those shares at a loss and claimed the loss as a trading loss. It was found in that case by the Tribunal that the intention of purchasing the shares was not to acquire them as part of the stock-in-trade of the taxpayer's business in shares, but to facilitate the acquisition of the managing agency of the company which was in fact acquired, and on that account loss incurred by the sale of a small lot could be regarded only as a loss of capital nature. The court observed in that case that the circumstance that the taxpayer had borrowed loans at interest to purchase the shares or that it was a dealer in shares and was authorised by its memorandum of association to deal in shares was of no effect. On a review of the evidence the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s soon after they were purchased. Aluminium shares were purchased between January 26, 1945, and April 5, 1946 (except a few which were retained), and sold at profit. Whereas the first lot was purchased on January 26, 1945, the first sale was made on February 1, 1945. It could not be said that this was an investment in shares independent of the trading activity of the firm. The story that the shares had to be sold on account of financial difficulties is plainly belied by the circumstance that the firm went on purchasing and selling the Aluminium shares. J. K. Trust shares were purchased on February, 14, 1945, and were sold on August 22, 1945. Aluminium shares as well as J. K. Trust shares were sold at a profit and through brokers. These tran ..... X X X X Extracts X X X X X X X X Extracts X X X X
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