9911796707
TMI Blog1962 (1) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court dismissed the application, agreeing with the Tribunal that the application to the Tribunal for a reference was barred by time. The Commissioner of Income-tax then applied for special leave against the order passed by the Tribunal in the appeal before it, and the present appeal, with special leave, has been filed. Before we examine the merits of the case, we shall deal with a preliminary objection raised on behalf of the respondent that the appeal is incompetent, in view of the decision of this court in Chandi Prasad Chokhani v. State of Bihar, where it was held that this court would not entertain an appeal directly from an order of the Tribunal by passing the decision of the High Court, except in very exceptional circums tances. The appellant relies upon the decision of this court in Baldev Singh v. Commissioner of Income-tax, and contends that the exceptional circumstances existing in the latter case, and adverted to in the former, govern the present case. The facts relating to the filing of the application for reference together with the relevant dates are these. The Tribunal's order was passed by two learned Members, who signed their respective orders on differ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax and Baldev Singh v. Commissioner of Income-tax. It was pointed out in the judgments of this court that the two cases relied upon were decided on the special circumstances existing there. In the first, there was a question of breach of the principles of natural justice, which could not be raised otherwise than by an appeal with the special leave of this court. In the second case, it was pointed out that limitation was lost by the party through no fault of his, inasmuch as a letter was unduly delayed in post. In our opinion, in the present case also, special circumstances which justified the grant of special leave in Baldev Singh's case exist. There was a combination of circumstances which led to the filing of the application a day late, but in circumstances showing that the default was not due to any negligence on the part of the Commissioner of Income-tax. The receipt of the notice on July 15 is admitted; but the affixing of the date stamp on the 16th was due to the failure of the clerk to deal with the notice on the 5th because he fell ill and had to leave the office. It is common knowledge that date stamps are altered every day in the office, and this is done mostly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wned by the " Yodh Raj Bhalla group ". To understand this, the following analysis of the shareholdings of these companies must be sufficient : (1) Jaswant Sugar Mills Ltd. 2,00,000 shares Rs. (i) Jaswant Straw Board Ltd. 44.845 (ii) National Finance Ltd. 67,390 (iii) National Construction and Development Corporation Ltd. 47,800 1,60,035 (i.e. over 80 per cent.) (2) Jaswant Straw Board Ltd. 6,176 shares (i) National Finance Ltd. 4,783 (ii) National Construction and Development Corporation Ltd. 500 5,200 odd (or nearly 84 per cent.) (3) National Finance Ltd. (assessee company) 50,000 shares Ganesh Finance Corporation Ltd. 48,000 (or over 96 per cent.) (4) National Construction and Development Corporation Ltd. 1,30,504 shares Ganesh Finance Corporation Ltd. 1,30,500 (almost all) (5) Ganesh Finance Corporation Ltd. 50,000 shares Raghunath Investment Trust Ltd. 49,795 (99.6 per cent, of the capital) (6) Raghunath Investment Trust Ltd. 10,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egistered in the name of the assessee company. 5,400 shares in the name of the National Construction and Development Corporation Ltd., and the balance in the names of the nominees of Jaswant Sugar Mills Ltd., which meant, largely, persons belonging to the : Yodh Ra Bhalla group." On October 9, 1948, the assessee company purchased 15,547 shares at Rs. from Jaswant Sugar Mills Ltd., and the amount 400 per share paid by the assessee company was adjusted towards the purchase price and the balance was paid. On the same day, the remaining 11,000 shares were sold by Jaswant Sugar Mills Ltd. to National Construction and Development Corporation Ltd., at Rs. 400 per share. Thus, on that date Jaswant Sugar Mills Ltd. ceased to have any connection with the present matter. It may be pointed out that on the date on which the two transactions took place, the price ruling in the market was about Rs. 217-8-0. Before Jaswant Sugar Mills Ltd. parted with the shares, they had appointed a new Board of Directors of the Madhusudan Mills Ltd., and these new directors also belonged to the same group. The managing agency of Messrs Bhadani Brothers Ltd., was terminated, and on the same day on which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e companies, he came to learn that the shares of the Madhusudan Mills Ltd. were purchased at a price, which was almost double the current market price, by the " Yodh Raj Bhalla group ", and were transferred at the same price to the assessee company. He found that this was done with a view to removing Messrs. Bhadani Brothers Ltd. from their managing agency and to securing for the assessee company the purchasing and selling agency of the mill. On the date of the purchase from Messrs. Bhadani Brothers Ltd., Jaswant Sugar Mills Ltd. achieved this purpose in view of their controlling interest. Bhadani Brothers Ltd. ceased to be the managing agents from that date, and the purchasing and selling agency of the Madhusudan Mills Ltd. was given to the assessee company, though it had, on that day, done no more than give a loan to Jaswant Sugar Mills Ltd. In the assessment year, 1951-52, the loss of Rs. 5,86,312-8-0 on the sale of Rs. 3,000 shares was, therefore, disallowed holding it to be a capital loss. The order of the Income-tax Officer, Central Circle V, New Delhi, was confirmed on appeal by the Appellate Assistant Commissioner. On further appeal by the assessee company, the Income-tax A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res may succeed in getting a large number of shares at a price less than the market price if the seller is in difficulties and wants to get rid of his shares and to get liquid assets. But we have not heard of a dealer in shares purchasing a large number of shares at a higher value than the market value. The other circumstance which is equally strong in this case is that the shares were purchased for the acquisition of the managing agency. Therefore the real object of the assessee company was not to do business in these shares, not to make profit out of the se shares, but to acquire a capital asset out of which it would earn managing agency commission and make profits." Messrs. Ramnarain and Sons Ltd. then appealed to this court, and the decision of the Bombay High Court was upheld. The judgment of this court is reported in Ramnarain Sons (Pr.) Ltd. v. Commissioner of Income-tax ? It was laid down by this court that in considering whether a transaction was or was not an adventure in the nature of trade, the problem must be approached in the light of the intention of the assessee, having regard to the " legal requirements which are associated with the concept of trade or business." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was contended before us that this was a, speculative deal in the hope that the price of the shares would firm up, when the textile industries would revive. If this was the intention, then it might possibly be argued that the purchasers miscarried in their calculations, and suffered a loss in a business transaction. But, was this the intention of the directors of Jaswant Sugar Mills Ltd.? Those who sold the shares were not only in possession of the shares but also of the managing agency of the Madhusudan Mills Ltd., and the intention of the directors of Jaswant Sugar Mills Ltd. was to remove the sellers from their position as managing agents and to get the entire benefit of such or other agencies for themselves. The assessee company has urged that that might have been the intention of the Jaswant Sugar Mills Ltd. but not of the assessee company which had, on that day, merely given a loan to Jaswant Sugar Mills Ltd. Curiously enough, however, the immediate benefit of the deal was the acquisition of the selling and purchasing agency of the mills, and that was obtained not in favour of Jaswant Sugar Mills Ltd. but of the assessee company, even though on July 15, 1948 (the date of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne company could not be attributed to another company, even though the proprietorship of the companies might be the same. As a proposition affecting companies, it cannot be gainsaid ; but we are not concerned with a theoretical question as to the assessee company being a separate legal entity, but with the question whether a particular loss made by the assessee company is a capital or a revenue loss. The two companies, i.e., Jaswant Sugar Mills Ltd. and the assessee company, were directed by the same set of persons, and the facts show that even though Jaswant Sugar Mills Ltd. temporarily acquired the shares, they conferred all the benefits of the acquisition upon the assessee company from the very first day. The assessee company also ultimately came into possession of all the shares along with another company, which was also directed by the same persons, and Jaswant Sugar Mills Ltd. went out of the picture within three months. In these circumstances it is easy to see that the interposition of Jaswant Sugar Mills Ltd. was merely a device to secure the benefit of the English case, to which we have referred. It was never intended that Jaswant Sugar Mills Ltd. would hold the shares or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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