9911796707
TMI Blog1988 (11) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... ember 20, 1969, the assessee sold the said shares at Rs. 6 per share. In the assessment year 1971-72, the accounting year ending on Deepawali 2027, Samvat year, the assessee was assessed to income-tax. The assessee claimed that the surplus realised on the sale of the said shares was capital in nature and as such not taxable. The Income-tax Officer held that the investment of the assessee in the said shares was not with a view to earn dividend as no dividend had been declared thereon and the assessee had earned no income by way of dividend in the past six years and that the assessee had acquired the said shares with the object of dealing in them. He held that the profit of Rs. 24,000 arising from the sale of the said shares was a profit and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sable as income from business as the shares were acquired for investment only. The Tribunal held that the surplus arising out of the sale of the shares was not income of the assessee assessable to income-tax and concluded as follows : ". . . The assessee made investment in the year 1967 and expected yearly dividends but he did not receive any dividend and, therefore, found that the investment had been blocked. He sold the shares to redeem the investment. Therefore, the initial investment in shares and the sale of those shares cannot constitute the assessee's business in share dealing, because only for the redemption of the investment, the assessee sold the shares so that he could use the same elsewhere more usefully." The Tribunal accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the contrary and submitted that the facts found by the Tribunal had not been challenged by the Revenue by a proper question and stood finally determined. As such, it was not open to the Revenue to contend at this stage that the surplus arising from the sale of the said shares was the business income of the assessee. The following decisions were cited at the Bar. (a) Raja Bahadur Kamakhya Narain Singh v. CIT [1970] 77 ITR 253 (SC). This decision was cited for the following observations, of the Supreme Court (at p. 261 ) : ". . . . That the question, whether an assessee carries on business or whether certain transactions are in the course of business or whether they amount to adventures in the nature of trade or business, is a mixed q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lting in a surplus in its hands. It was contended that such profit was capital gain and not income in its hands. The assessee contended further that it was not a dealer in shares and had not been trading as such in earlier assessment years and that the necessity for sale of the shares in the relevant assessment year was the reduction of a bank overdraft. It was held by the Tribunal that as there had been purchases and sales of shares by the assessee over the past several assessment years by reason of the multiplicity of the transactions, the assessee ceased to be an investor and became a dealer in shares, though it dealt only in the shares of its managed companies. It was held that the surplus on the sale of shares in the relevant assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the said shares with dividend and had earned high dividend. The said shares were never transferred in the name of the assessee and were sold within two months after acquisition of the same by the assessee. On these facts, the finding of the Tribunal that the said shares had been purchased by the assessee with the object of making profit by way of dividends was accepted. The learned advocate for the Revenue also cited a decision of the Andhra Pradesh High Court in State Bank of Hyderabad v. CIT [1985] 151 ITR 703. It appears to us that the facts in the said case are entirely different from the facts before us in the instant reference and the principles laid down in the said decision have no relevance to the controversies involved in the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble at all. Assuming that the shares were held as an investment and on the sale thereof, a surplus accrued in the hands of the assessee, the same must be held to be an accretion to the capital of the assessee and as such taxable as capital gains. This was also the case of the assessee before the Appellate Assistant Commissioner. For the above reasons, I answer the question referred by stating that the profit of Rs. 24,000 on the sale of the said shares is not taxable in the hands of the assessee as business income but that it is taxable as a capital gain. In the facts and circumstances, there will be no order as to costs. Let a copy of this judgment be sent under the seal of this court and signature of the Deputy Registrar, Patna, to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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