TMI Blog1991 (12) TMI 94X X X X Extracts X X X X X X X X Extracts X X X X ..... without success. It, therefore, preferred a further appeal to the Tribunal which was disposed of by the Appellate Tribunal " A-Bench ", Calcutta in I.T.A. No. 1663 (Cal.) of 1975-76 by their order dated 23-9-76. The Tribunal set aside the order of the AAC and restored the matter to his file for fresh disposal for the following reasons set out in paragraph 2 of the said order dated 23-9-76 which is quoted below :-- " After hearing both sides on this appeal, we are of the opinion that the Appellate Assistant Commissioner's order appealed against deserves to be set aside and he must dispose of the appeal afresh in accordance with law. From the aforesaid order it is not clear whether anybody appeared before him on behalf of the assessee. The case was heard on 25-1-1975 and was understand from the Departmental Representative that the notice was dated 18-1-1975. This is also evident from the Appellate Assistant Commissioner's records. The order sheet entry in the Appellate Assistant Commissioner's record was dated 25-1-1975. The entry in the order sheet is illegible to all of us. The learned counsel for the assessee could not specifically state as to whether anybody appeared before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the loss rejecting the assessee's contentions that this loss of Rs. 3 lakhs should be allowed as a revenue loss incidental to its business. The Commissioner held that the assessee was not carrying on any business of dealing in shares, that the shares of Madras Vanaspati Ltd. acquired by the appellant were treated by it as its investment and not as its stock-in-trade and that the assessee's claim that the purchase of these shares was done for reducing the extent of the debt due to it by Madras Vanaspati Ltd. was of no relevance in respect of its claim of a trading loss. According to the Commissioner this was due to the fact that the adjustment of the purchase consideration for the shares against the loan account represented only the mode of payment of the cost of acquisition of the shares, that instead of making an out-right payment in cash for the purchase of shares, the assessee had made the direct payment of the sale consideration by getting it adjusted against the loan amount outstanding and due to it and that such an action would not convert the shares which were acquired as investment into its stock-in-trade. In support of this conclusion the CIT(Appeals) relied on the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellate Tribunal was taken up in Reference to the High Court by the Commissioner of Income-tax and that the said Reference has also been decided in favour of the assessee as could be seen from the Solicitor's letter dated 2-2-89 at page 16 of the Paper Book, The learned Chartered Accountant also relied on the assessee's written submissions at page 17 of the Paper Book which was filed before the CIT(Appeals) and contended that the CIT(Appeals) ought to have followed the decision of the Supreme Court in the case of Pandit Narain Dutt Chhimwal and held that the loss in question was allowable as business loss. He further submitted that the decision of the Madras High Court in the case of VR. KR. S. Firm relied on by the CIT(Appeals) were entirely different from the facts of the present case. He submitted that the purchase of shares of Madras Vanaspati Ltd. was not an investment but as a part of the assessee's money lending business to realise its money to the tune of Rs. 33 lakhs advanced to the said Madras Vanaspati Ltd. and that, therefore, the loss in question was allowable as business loss arising in the course of the assessee's money lending business. 6. Shri A. Ghosh, the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with section 439 of the Companies Act, 1956. The agreement also makes it clear that prior to 30-3-1968 the assessee had no shares in the debtor company and that it was only on that day, as a measure to be of help to the Madras Company, it agreed to subscribe for the available balance of the issue but not yet subscribed capital, viz. 1,69,488 equity shares of Rs. 3 each by paying to it the entire sum of Rs. 5,08,464 for the same. It was as part of that agreement that the assessee agreed as a measure of further help to the debtor company not to charge interest on its loan for the year from 1-5-1967 to 30-4-1968. It was not as if the assessee did not get substantial advance as a result of this concession granted by it. For, by means of the same agreement, the assessee obtained from the debtor company an agreement to create a second charge on the assets for the entire amount due to it. Needless to say that if such a charge had not been obtained, the assessee would have had to continue as an unsecured creditor of the Madras Company which was by no means in a happy financial position then. By the agreement the assessee had agreed not to claim the interest that had already been credited i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned Chartered Accountant the assessee had to show the shares under the head " investment " in the form of Balance Sheet prescribed under the Companies Act, but it is not decisive nor conclusive of the issue regarding its true nature and character. 10. In Pandit Narain Dutt Chhimwal's case the assessee had acquired certain lands in the course of its money lending business. Subsequently, these lands were sold in plots by the assessee. The assessee's claim was that the profit arising on the sale of these plots of lands was not taxable as income but this was negatived by the Tribunal who held that the lands in question which were acquired in lieu of money lending debt continued to retain its character of business asset until it was sold and that, therefore, the profit constituted profit of the assessee's money lending business. This decision of the Tribunal was affirmed by the High Court and on further appeal to the Supreme Court, Their Lordships of the Supreme Court confirmed the decision of the High Court holding that there was no infirmity in the reasoning and conclusion of the Tribunal on the facts. 11. In our view, this decision of the Supreme Court is directly applicable to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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