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TMI Blog1970 (4) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... ed a sum of Rs. 79,78,055.50. The company also purchased Government securities of the value of Rs. 1,00,00,000 and out of those sold securities of the value of Rs. 69,00,000 earning a profit of Rs. 21,024. In proceedings for assessment of income-tax for the assessment year 1953-54, the company claimed allowance for the loss suffered in the sale of the securities. The claim was disallowed by the Income-tax Officer. He held that it was no part of the business of the company to deal in securities that the transactions in securities did " not appear to be a normal business venture of the company ", and that the memorandum and articles of association of the company prohibited transactions of sale of securities and on that account the loss was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a particular loss is a trading loss or a loss on the capital side, depends on the facts of each case. The question, however, is not one of pure fact but a mixed question of fact and law; and the decided cases indicate how the matter is to be viewed in the context of the facts. The problem must be approached in such cases in the light of the intention of the assessee, having regard to the legal requirements which are associated with the concept of trade or business." As observed in paragraph 2 of the statement of case submitted by the Tribunal, the company was incorporated with the objects, amongst others, " to invest and deal with the moneys of the company, and in particular to subscribe for or otherwise to acquire and to hold and deal w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ograph theatre, because against the receipts were set off the depreciation and repair charges, and the entire receipts of the company were from interest and dividends. The loss which the company suffered in the account year 1952-53 relevant to the assessment year 1953-54 arose from transactions relating to sale of 3% 1970-75 Loan. The company purchased securities of the face value of Rs. 92,50,000 in two lots between July 28, 1948, and March, 1949, for Rs. 93,18,625. These securities were sold between September 2, 1952, and February 9, 1953, through the United Commercial Bank at rates varying between Rs. 88-6-0 and Rs. 85-15-0 in 19 different lots. The company also purchased in the year of account 1952-53, securities worth Rs. 1,00,00,000 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government securities and stocks and shares of public limited companies. Some of the securities were redeemed in 1951-52. In 1952-53 the company sold securities of the value of Rs. 92,50,000 and securities of the face value of Rs. 1,00,00,000 were purchased. No investigation was made by the Income-tax Officer whether the redemption of securities in 1951-52 was on maturity or for other reasons. Nor did he investigate the reason which persuaded the company to sell securities of a very large value at a loss, and to purchase securities in the course of the same year of the face value of a crore of rupees. From the circumstance that the company did not effect any transaction of sale or redemption of securities between 1948 and 1951 no inference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d methods. No inference may, therefore, arise from the employment by the company of the method of valuing stock at cost, that the stock valued was not stock-in-trade. Nor is the description of stock in the balance-sheet as " investments " decisive. The transactions in securities and shares, it is true, were not frequent, but they were of very large amounts. In the year of account 1952-53 the transactions of sale and purchase of securities were in number substantial and in value considerable. It is true that the profit earned by sale of securities of the value of Rs. 69,00,000 in 1952-53 was not brought into account. But the profit was withheld on the plea that " the transaction was not complete ". Whether the plea was in law justified is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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