TMI Blog1994 (7) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... ving come to the conclusion that the investment in the shares in question for the purpose of acquiring more business is justified in rejecting the claim that the amount in question cannot be allowed as a deduction in business loss ? 3. Whether the conclusion of the Tribunal that the sum of Rs. 39,000 is not a business loss, is a fair and reasonable view to take in the matter ? " The assessee is a company carrying on business in structural engineering and was, at the relevant time, having business relations with Kothari Sugars and Chemicals Ltd. In the year 1961, the assessee acquired 6,000 shares of Rs. 10 each in the said company. These shares were subsequently sold by the assessee during the previous year ending on September 30, 1976, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... narain Sons (P.) Ltd. v. CIT [1961] 41 ITR 534. On appeal, the Appellate Assistant Commissioner found as a fact that the shares had been purchased in order to have good business with Kothari Sugars and Chemicals Ltd. In spite of it, it was held that since the assessee did not treat those shares as stock-in-trade, it was not entitled to treat the loss as business loss. The assessment was, therefore, upheld. On further appeal, the Appellate Tribunal held that the assessee was not a dealer in shares and stocks and there was no compulsion on it to purchase or sell those shares. The Appellate Tribunal further found that the improvement in the assessee's business with the Kothari group may be for more than one reason. It was, therefore, held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase the appellant's business with the Kothari group. In spite of these findings, the Tribunal did not give the benefit to the assessee because those shares were not converted into stock-in-trade. In view of those findings, it is apparent that there is a nexus between the business of the company and the purchase of the shares. The business of the company would not have increased as it did actually but for these shares. The question requiring consideration is whether loss suffered by selling these shares could be treated as business loss or not ? The question came up for consideration of a Division Bench of this court in Addl. CIT v. B. M. S. (P.) Ltd. [1979] 119 ITR 321. It was a case where the assessee, who was in the road transport busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Supreme Court has been brought to our notice taking a contrary view of the matter. Learned counsel for the Revenue, however, submitted that as long as the shares were not treated to be stock-in-trade by the assessee, the loss could not have been treated to be a business loss. He had relied upon the decision in Ramnarain Sons (P.) Ltd. v. CIT [1961] 41 ITR 534 (SC). In the aforesaid case, the assessee was a dealer in shares and securities and also carried on business as managing agent of other firms. He had, in order to acquire the managing agency of a textile mill, purchased shares of another company. The subsequent sale of those shares caused loss to him and the loss was claimed as a trading loss. The Supreme Court found as a matter o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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