9911796707
TMI Blog1973 (5) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... 12B of the Indian Income-tax Act, 1922, did not apply to the transaction resulting in the loss of Rs. 53,761 incurred by the assessee ? " The assessee who is a chartered accountant purchased in 1948-50 cumulative preference shares in South India Sheet Metal Company Ltd. at a cost of Rs. 5,000. He was receiving dividend from the said company up to the accounting year relevant for the assessment year 1952-53. In 1956 the company went into liquidation. On December 8, 1960, the official liquidator informed the assessee that the assets of the company were not sufficient even to pay off the secured creditors and that there was no possibility of the shareholders being paid any portion of their capital investment therein. For the assessment year 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titled to set off these losses against his other capital gains in that year. Shares are movable properties and they are capital assets admits of no doubt. Even in the case of winding up of a company the shareholder who would be a contributory would have a right to participate in the residue after paying the liability. The question for consideration is whether in view of the fact that the value of the shares have been reduced or became nil value because of the company going into liquidation and the official liquidator finding that the assets of the company were not sufficient even to pay off the secured creditors, the assessee could be said to have suffered a capital loss. It is not every capital loss that is sustained by an assessee that c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hareholder or a contributory nor any of his rights as a shareholder or contributory are affected, though the share value might have been reduced to nil. In this connection it is useful to refer to the decision of this court in Madurai Mills Company Ltd. v. Commissioner of Income-tax. In that case the assessee was a shareholder in three private limited companies. The companies went into voluntary liquidation. As a result of the distribution of the assets of the three companies, the assessee-company obtained cash or assets in the shape of shares in other companies and immovable properties. The Income-tax Officer held that by reason of the distribution of the assets of the three companies under liquidation by the liquidator there had resulted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and reasonable in the circumstances of the case that an order of dissolution of the company should be made, the court shall make an order that the company be dissolved from the date of the order and the company shall be dissolved accordingly. Relying on this provision the learned counsel contended that the company shall be deemed to have been dissolved, and, therefore, there was a relinquishment of the shares. During the assessment year the winding-up of the company was not over, nor an order of dissolution was obtained from the court. Therefore, the question whether the dissolution of the company would amount to a relinquishment does not arise for consideration in this case. We are, therefore, of the opinion that the assessee was not enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... till his rights and obligations under the decree could not be said to have been relinquished by merely writing it off in his accounts. Being a decree of a court, until the satisfaction of the decree is entered into in a mode known to law, the decree will still be executable and the debtor will not be entitled to take advantage of the entry made by the assessee-creditor. We are, therefore, of the opinion that the sum of Rs. 53,761 was also not entitled to be set off against the assesee's other capital gains.
For the foregoing reasons, we answer both the questions referred to us in the affirmative and against the assessee. But there will be no order as to costs.
Questions answered in the affirmative. X X X X Extracts X X X X X X X X Extracts X X X X
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