9911796707
TMI Blog1957 (5) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... ch was comprised of shares in the Sassoon Group of Mills. During the year ended 30th June, 1929, the petitioner Company promoted two companies known as Loyal Mills Ltd., and Hamilton Studios Ltd. and took over all their shares of the value of Rs. 10 1/2 lacs. In the year 1930, the petitioner company purchased shares of Rs. 1,33,930. During the period of 9 years from 1st July, 1930, to 30th July, 1939, no purchases were made with the exception of a few shares of Loyal Mills Ltd. taken over from the staff of E. D. Sassoon & Co. Ltd., who retired from service. In the year ended 30th June, 1940, reconstruction scheme of the Appollo Mills Ltd. took place under which debentures held by the petitioner company in the Appollo Mills Ltd., were redeemed and the proceeds were reinvested in the new issue of shares made by the Appollo Mills Ltd. Out of the purchases of the value of Rs. 2,794 made by the petitioner company during the year ended 30th June, 1941, Rs. 2,000 was the value of shares of the Loyal Mills Ltd., taken over from the retiring staff. In the year ended 30th June, 1943, the petitioner company took over from the David Mills Co. Ltd., shares of the Associated Building Co., of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax Officer in the 1940-41 assessment that the company was to be assessed as a dealer in investments. Since that return was submitted the Central Board of Revenue has decided that the company is an investment holding company and accordingly an amended return of total income under section 22(1) of the Indian Income-tax Act is submitted herewith on which the assessment for 1943-44 may be based, as on this particular question the company obviously cannot have one status for excess profits tax and another for income-tax." It was also contended that it never carried on any business in the purchase or sale of shares, securities or properties and therefore prayed that in view of the order of the Central Board of Revenue made on its application under section 26(1) of the Excess Profits Tax Act it should be assessed for income-tax purposes as an investor and not as a dealer. The Income-tax Officer rejected this plea and "held the investments as the stock-in-trade of its business therein which it carried on during the 'previous year' also." The company took an appeal to the Appellate Assistant Commissioner which was dismissed and the order of the Income-tax Officer upheld. It then a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all along in the past asserted that it was a dealer in investments and properties." This was more than it had said in its appellate order. The assessee company then made an application under section 66(2) of the Indian Income-tax Act for requiring the Appellate Tribunal to state the case and refer it to the High Court, but this application was dismissed, and then the company obtained special leave to appeal to this Court. Counsel for the assessee company contends that the questions of law arise out of the order of the Tribunal because the Tribunal has ignored the documentary evidence produced before it, has based its decision on irrelevant matters, has failed to consider crucial facts and has misdirected itself by assuming that the petitioner was a dealer from the very beginning which was contrary to the documents produced before it. Section 66(1) of the Income-tax Act (hereinafter termed the Act) provides that any assessee may require the Appellate Tribunal to refer to the High Court any question of law arising out of its appellate order and it is the statutory duty of the Appellate Tribunal to draft the statement of the case and refer the question of law arising out of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration the course of dealing of the shares by the company and also that the turning of investment to account was not merely incidental but was an essential feature of the business, speculation being among the appointed means of the company's business, the Court came to the conclusion that the company was carrying on a business. The Lord President in a Scottish case Cayzer, Irvine & Co. Ltd. v. Commissioners of Inland Revenue stated the grounds on which the Court can interfere with the finding of the Commissioner as follows : "I think we have jurisdiction to entertain the question at law, which is whether the majority of the Commissioners were warranted on the evidence in determining as they did. At the narrowest it is always open to this Court in a stated case to review a finding in fact on the ground that there is no evidence to support it." Lord Parker in Farmer v. Trustees of the Late William Cotton after referring to the difficulty of distinguishing between a question of fact and a question of law observed : "Where all the material facts are fully found, and the only question is whether the facts are such as to bring the case within the provisions properly construed of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e fact. This is sought to be effected by styling the finding on a mixed question of law and fact a finding of fact." According to the dictum of Lord Wrenbury the question for the Court was whether on the facts found and stated by the Commissioners the clerk held the office within the meaning of the Act which was a question of law. In Lysaght v. Commissioners of Inland Revenue the question for decision was whether assessee was a resident and ordinarily resident in United Kingdom in the year of assessment. Lord Buckmaster said : "The distinction between questions of fact and questions of law is difficult to define....... It is, of course, true that if the circumstances found by the Commissioners in the special case are incapable of constituting residence their conclusion cannot be protected by saying that it is a conclusion of fact since there are no materials upon which that conclusion could depend. But if the incidents relating to visits in this country are of such a nature that they might constitute residence, and their prolonged or repeated repetition would certainly produce that result then the matter must be a matter of degree ; and the determination of whether or not the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no evidence to support is to make an error in law." In Edward v. Bairstow the respondent embarked upon a joint venture to purchase a spinning plant with the object of holding it for quick resale and at a profit. The General Commissioners found that there was no venture in the nature of trade but the Court held that the facts found led inevitably to the conclusion that the transaction was a venture in the nature of trade and that Commissioners' inference to the contrary was erroneous. Lord Simonds observed at page 587 that : "To say that a transaction is, or is not, an adventure in the nature of trade is to say that it has or has not the characteristics which distinguish such an adventure, but it is a question of law, not of fact, what are those characteristics........" At page 589 Lord Radcliffe pointed out : "I think that it is a question of law what meaning is to be given to the words of the Income Tax Act 'trade, manufacture, adventure or concern in the nature of trade' and for that matter what constitutes 'profits or gains' arising from it. Here we have a statutory phrase involving a charge of tax, and it is for the Courts to interpret its meaning, having regard to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mstances of the case to act upon the supposition that it exists. The question for decision in Dhirajlal Girdharilal v. Commissioner of Income-tax, Bombay, was whether a Hindu undivided family was carrying on business in shares and it was held that this was a question of fact but if the Appellate Tribunal decided the question by taking into consideration materials which are irrelevant to the enquiry or partly relevant and partly irrelevant or based its decision partly on conjectures then in such a situation an issue of law arises, which would be subject to review by the Court and the finding given by the Tribunal would be vitiated. The result of the authorities is that inference from facts would be a question of fact or of law according as the point for determination is one of pure fact or a mixed question of law and fact and that a finding of fact without evidence to support it or if based on relevant and irrelevant matters is not unassailable. The limits of the boundary dividing questions of fact and questions of law were laid down by this Court in Meenakshi Mills v. Commissioner of Income-tax, Madras, where the question for decision was whether certain profits made and show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be a dealer and then to be an investor which according to the Tribunal was due to the fact that it was incurring losses in the earlier years and had begun making profits when the claim of being an investor was put forward. But the two basic facts on which the Tribunal has based its findings are : (1) the objects set out in the memorandum of association of the assessee company ; (2) the previous assertion by the assessee company that it was a dealer in investments and not merely an investor. Counsel for the assessee relies on the decision of Kishan Prasad's case, where this Court held that the circumstances whether a transaction is or is not within the powers of the company has no bearing on the nature of the transaction or on the question whether the profits arising therefrom are capital or revenue income and, therefore, it is contended that the Tribunal has relied upon an irrelevant circumstance. Counsel for Revenue on the other hand refer to the judgment in Lakshminarayan Ram Gopal v. Government of Hyderabad, where the objects of an incorporated company were held not to be conclusive but relevant for the purpose of determining the nature and scope of its activities. Mere ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
