9911796707
TMI Blog1976 (4) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... s an investment company and levied additional super-tax under section 104(1) of the Income-tax Act, 1961, as in the earlier assessment year 1962-63, where it was held that the assessee was an investment company and this finding was confirmed in appeal. This order of the Income-tax Officer in this assessment year was confirmed respectively by the Appellate Assistant Commissioner and the Tribunal. It was contended on behalf of the assessee before the Tribunal that the expression "investment" in section 109(ii) of the Act ought to be interpreted in the commercial sense and not according to its dictionary meaning and it ought to have been held that the assessee was not an investment company within the meaning of the said section. The Tribunal found as a fact that about 80 per cent. of the assets of the assessee had been advanced by way of a deposit to a single party. It was further found that the assessee looked forward to earning interest regularly from the said deposit and the interest on this loan constituted the major part of the assessee's income. Accordingly, the Tribunal held that this was an investment. The contention of the assessee that this was not capable of being dealt w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use of the will. The next case cited by Mr. Sen was Inland Revenue Commissioners v. Laurence Philipps & Co. (Insurance) Ltd. [1947] 2 All ER 144 (KB). In this case the assessee-company was formed with the object of carrying on business inter alia, of insurance brokers, insurance agents, agents or managers of any insurance company, club or association or any individual underwriter and also to lend money to any person or company. In the year 1934, the assessee took part in the formation of a marine syndicate. The assessee acted as an underwriting agent of this syndicate and received a salary and commission. In the year 1935 the assessee further promoted a non-marine syndicate. In this non-marine syndicate certain persons were lent monies by the assessee on the strength of which they joined the syndicate and became underwriting members. The question arose whether the loans made by the assessee to these members of the non-marine syndicate was capital employed in the trade or business within the meaning of the Finance Act, 1939, and whether the said amounts should be included in computation of the "pledged amount of the capital" for the purpose of assessment of excess profits tax. In h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... twithstanding that it is an investment-- but, if a debt arises from a business transaction or through the employment of money in the business, it seems to me that the debt is capital within para. 1 of pt. II of the schedule." Mr. Sen has also cited a judgment of the Supreme Court in the case of Commissioner of Income-tax v. Distributors (Baroda) P. Ltd. [1972] 83 ITR 377 (SC). In this case the Supreme Court had to consider clause (i) of Explanation 2 to section 23A of the Indian Income-tax Act, 1922. In construing the said clause the Supreme Court held that a company must be one whose primary business must be "in the dealing in or holding of investments" before it came within the mischief of this section. The Supreme Court construed the meaning of the expression "holding of investments". The Supreme Court followed its earlier decisions in the case of Narain Swadeshi Weaving Mills v. Commissioner of Excess Profits Tax [1954] 26 ITR 765 (SC) and in the case of Bengal and Assam Investors Ltd. v. Commissioner of Income-tax [1966] 59 ITR 547 (SC) and held that the expression "business of holding of investments" consisted of some real, substantial and systematic or organized course of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Income-tax Act, 1961. The investments which had originally been made by the assessee as an insurance company were continued by virtue of section 2D of the Insurance Act for the purpose of discharge of its obligation as an insurer. It was found that in the year in question there was no investment nor any evidence of any activity of dealing systematically or in any organised manner in investment business. The Tribunal had found that the investments had been made earlier in the usual course of its insurance business. The law as laid down by the Supreme Court in the case of Distributors (Baroda) Private Ltd. [1972] 83 ITR 377 (SC) was followed and applied. After a careful consideration of the law as laid down in the various decisions noted above and the facts found in the instant case, it appears to us that it would not be possible to answer the question which has been referred to us without further finding of facts. The law has been settled by the Supreme Court in Commissioner of Income-tax v. Distributors (Baroda) P. Ltd. [1972] 83 ITR 377 (SC). Before a company can be stated to be an investment company falling within the mischief of section 109(ii) of the Income-tax Act, 1961, ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
