9911796707
TMI Blog1972 (9) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... he finding that the shares in question were purchased by the assessee with a view to acquire the managing agency and control of the company. It was further held that the shares constituted the stock-in-trade of the assessee. In view of the above, the High Court held in answer to question No. (ii) that the profits made by the sale of shares could not constitute capital gain chargeable to income-tax under section 12B of the Act. The matter relates to assessment year 1947-48, the relevant previous year for which was the Dassera year 2002-2003 corresponding to the period from October 16, 1945, to October 5, 1946. Rameshwar Prasad Bagla, the assessee-appellant, is a partner of firm Agarwal & Co. having one-sixteenth share in the firm. Agarwal & Co. consisted of six groups of partners, viz., (1) Morarka group, (2) Khetan group, (3) Seksaria group, (4) Poddar group, (5) Bagla group and (6) Kantilal Nahalchand. The Bagla group consisted of the assessee and his brother. M/s. E. D. Sassoon & Co. Ltd. were the managing agents of the India United Mills Ltd. The latter is a public limited company and was engaged in the manufacture of textiles in Bombay. Large blocks of ordinary and deferr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Trust Corporation which was a company formed by Sassoon group of companies. After the managing agency of the India United Mills Ltd. had been taken over by Agarwal & Co. on December 1, 1943, those shares were transferred between March and August, 1944, in the name of various persons residing in Jaipur. Those persons transferred the said shares in favour of the assessee on January 30, 1945. The assessee borrowed rupees ten lakhs from Agarwal & Co. in order to pay for the price of those shares. Out of 62,500 shares acquired by the assessee, he sold 43,700 shares during the period from April 3, 1946, to July 19, 1946. in seven lots. The rest of the shares remained in the possession of the assessee during the relevant year. The sale of 43,700 shares resulted in a profit of Rs. 1,80,220 to the assessee. The sale proceeds were thereafter utilised by the assessee for purchasing shares of Swadeshi Mills Ltd., Kanpur. The assessee did not disclose the profit of Rs. 1,80,220 in the return. In response to a notice issued by the Income-tax Officer, the assessee wrote a letter dated March 30, 1949, in the course of which he stated : " I have already brought to your honour's notice in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to obtain the managing agency and control of the company. It may also be noted here that if the price ruling at the time of the transfer was to be taken into account, perhaps, there is no profit. The profit has been shown as the transfer is made at the price at which the shares were originally sold by the Sassoons. We think that on the facts before the income-tax authorities the assessee's holding of shares in the India United Mills Ltd. was not the purchase of a stock-in-trade as held by the department. We accept the assessee's appeal and direct that the excess realised on the sale of these shares is not income which is liable to income-tax. " An application was, thereafter, filed on behalf of the respondent for stating a case to the High Court, but that application was rejected. The respondent then approached the High Court under section 66(2) of the Act. The High Court thereupon directed the Tribunal to draw up a statement of case and refer the questions reproduced earlier to the High Court. After the questions were referred, the High Court gave answers to the questions, as mentioned at the commencement of this judgment. We have heard Mr. Bhagirath Das on behalf of the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fying interference with the finding of fact of the Tribunal has been shown to exist in this case. In the absence of any such circumstance, the High Court in our view was not justified in interfering with the finding of fact of the Tribunal. The fact that the High Court on appreciation of evidence would have arrived at a conclusion of fact different from that of the Tribunal did not warrant interference with the finding of the Tribunal. The Tribunal in arriving at the conclusion that the purchase of the shares in question by the assessee was with a view to obtain the managing agency and control of the India United Mills Ltd. and that those shares were not purchased as stock-in-trade referred to a number of circumstances. It was found by the Tribunal that the shares in question were out of the lot sold by Sassoons to Agarwal & Co. It was also found that the shares had been transferred to the assessee at the original price at which these shares had been sold by the Sassoons and not at the price which was prevailing at the time of transfer. The Tribunal further found that 62,500 shares represented the portion of the assessee in the total number of shares originally purchased by Agarw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business in shares of any importance in the circumstances of the case. " It was further observed : " Subsequent disposal of some out of the shares by the appellants could also not convert what was a capital acquisition into an acquisition in the nature of trade. " We are, therefore, of the view that the answer given by the High Court to question No. (i) was not correct. In our opinion, there was material for the finding that the shares in question had been purchased by the assessee with a view to acquire the managing agency and control of the India United Mills Ltd. and that the shares did not constitute the stock-in-trade of the assessee. So far as the second question is concerned, we find that it is the common case of the parties that if the shares in question are held to be not stock-in-trade of the assessee, in that case the profits made on the sale of those shares would constitute capital gain chargeable to income-tax under section 12B of the Act. Indeed, this is what was prayed for by the assessee in his letter dated March 30, 1949. Looking to the facts also, we are of the opinion that the profit made on the sale of those shares constituted capital gain chargeable to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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