TMI Blog1966 (3) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... erence that the securities in question were held by the assessee as an investment and not as a stock-in-trade and that the loss incurred thereon was a capital loss is, in law, justified ?" The material facts as disclosed in the statement of the case are these : The assessment year is 1953-54, the relevant accounting year being 1952-53 ending on March 31, 1953. The assessee is a company incorporated in the year 1948, with several objects set out in the memorandum of association, including those mentioned in clause 16 thereof, which reads: "To invest and deal with the moneys of the company, and in particular to subscribe for or otherwise acquire and to hold and deal with the perpetual or redeemable/debentures or debenture-stock or obligat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thorised to deal in securities and that the transaction in question, not being a normal business venture but being one " of a casual and capital nature ", resulted in loss of capital. The Appellate Assistant Commissioner too disallowed the claim, holding that the assessee-company was not a dealer in securities, on the following grounds : (i) The company had, from the time it commenced business seven years ago in 1948, effected sales of securities only in the account year 1952-53. (ii) In other years, securities were only redeemed and not sold, showing that the company was an investor and not a dealer in securities. (iii) In the balance-sheets, the securities were shown as investments. They were not valued at the market rates, which we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , which were accepted by the Tribunal also, contra-indicate that the transaction in this case was an adventure in the nature of trade. It is, however, argued that merely because the assessee had valued the securities at cost and not at the lower market rates, it could not be concluded that they were investments and not the assessee's stock-in-trade. In a matter like this, so it was contended, all that can be insisted upon is adherence to a regular basis of valuation and the assessee is free to adopt his own method of accounting. This is undoubtedly correct and yet, in considering whether the securities were stock-in-trade of an adventure in the nature of trade, it cannot be ignored that the generally accepted and established rule of commerc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany as financiers, inasmuch as investing and realising its holdings when finances were needed is part of the normal business of the company. . . There is ample evidence to show that the company did in fact carry on the business of financiers, which is one of the objects mentioned in clause 3(1) of the memorandum of association. The evidence pertaining to the financial transactions of the company, during the relevant accounting years, to which we have referred, clearly establishes that the realisation of profits on investment is directly referable to the carrying on of the company's business as financiers." On those conclusions, the Supreme Court observed : "The principle applicable in all such cases is well-settled and the question alw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was, in the course of the business carried on by a bank, sale of shares and investments to meet the withdrawals by depositors and it was held to be a normal step in carrying on banking business. In the instant case, securities were sold only in the account year 1952-53, and it was not shown that the sale was justified upon business considerations similar to those existing in the abovementioned Supreme Court and the Privy Council cases. We must, therefore, reject this contention. In the view we have taken of the facts and circumstances of this case, we are of opinion that the Government securities were held as an investment and not as a stock-in-trade and, therefore, the loss incurred in this case was a capital loss. We answer the q ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
