9911796707
TMI Blog1960 (12) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... he affirmative, whether the loss suffered by the assessee-company of Rs. 1,78,438 on purchase and sale of 400 shares of the Dawn Mills Co. Ltd., being incidental to its business of acquiring the managing agency, was a loss of a revenue nature ? " as follows : (1) Acquisition of the managing agency was an acquisition of a capital asset. (2) The loss in respect of the 400 shares was of a capital nature. Against the order of the High Court, this appeal is preferred with special leave. The appellants area private limited company registered under the Indian Companies Act, 1913, and carry on business as brokers, managing agents and dealers in shares and securities. One of the objects for which the appellants were incorporated was to acq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 7,97,792 which included a loss of Rs. 7,04,000 on the valuation of the Dawn Mills shares held by the appellants at the end of the year of account. In the income-tax assessment for the year 1947-48, the appellants claimed Rs. 86,927 as loss on sales in trade in shares and Rs. 7,97,792 as loss on valuation of stock-in-trade. The Income-tax Officer, Companies' Circle III(I), Bombay, disallowed the loss suffered by the appellants in the sale of the Dawn Mills shares, because in his view those shares were purchased by way of capital investment and the loss suffered by sale thereof could not be allowed as a trading loss. He also held that the appellants were not entitled to depart from the method adopted in earlier years and to value the clos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mills were not the stock-in-trade of the appellants and that those shares were purchased by the appellants with the object of acquiring the managing agency. The High Court, however, held that the shares acquired by the appellants formed a capital asset and the loss suffered by sale of 400 out of those shares in the year of account being a capital loss, was not in the computation of income a permissible deduction. The High Court dismissed the notice of motion taken out by the appellants. In considering whether a transaction is or is 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch led to the acquisition of the managing agency could not, in the absence of an intention to trade in those shares, be regarded as acquisition of stock-in-trade of the share business. The appellants had undoubtedly purchased the shares of the Dawn Mills with money borrowed at interest, but that circumstance by itself does not evidence an intention to trade in the shares. Nor is the fact that the appellants are dealers in shares and their memorandum of association authorises them to carry on business in shares of any importance in the circumstances of the case. The appellants by entering the shares of the Dawn Mills in their statement of shares in which trading transactions were carried on could not alter the real character of the acquisiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellants ; but the shares purchased and the managing agency acquired were both assets of a capital nature and did not constitute stock-in-trade of a trading venture. If the shares were acquired for obtaining control over the managing agency of the Dawn Mills, the fact that the acquisition of the shares was integrated with the acquisition of the managing agency did not affect the character of the acquisition of the shares. Subsequent disposal of some out of the shares by the appellants could also not convert what was a capital acquisition into an acquisition in the nature of trade. The High Court was therefore right in holding that the acquisition of the managing agency was an acquisition of a capital asset and the loss incurred by sa ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
