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Issues:
- Determination of whether a loss incurred by the assessee company from the sale of shares was a trade loss or an investment loss. Analysis: The judgment by the Calcutta High Court under section 66(1) of the Income-tax Act involved a reference regarding the treatment of a loss of Rs. 3,71,300 by the assessee company arising from the sale of shares. The Income-tax Officer initially disallowed the loss, considering it as an investment transaction. However, the Appellate Assistant Commissioner and the Tribunal deemed it a trade loss, allowing the deduction. The central question was whether the shares were acquired for investment purposes or as part of the company's business as dealers in shares. The Tribunal identified key facts supporting the trade loss classification, including the company's history of dealing in shares, the purchase of shares using borrowed funds, transactions at prevailing market rates, and the company's objective to engage in share trading. The Tribunal disagreed with the Income-tax Officer's view that the shares were acquired for investment, highlighting the improbability of purchasing shares with borrowed money for investment during a declining market. The Court emphasized the importance of adhering to the Tribunal's factual findings unless proven otherwise. The Court deliberated on the genuineness of the share transactions, distinguishing the case from a Supreme Court precedent involving fictitious transactions. In this instance, the shares were transacted at market rates, and no evidence suggested the transactions were not authentic. The Court rejected the argument that subsequent events, such as the purchaser acquiring a company secretaryship, determined the nature of the initial transaction. Ultimately, the Court upheld the Tribunal's decision, affirming the loss as a trade loss rather than an investment loss. The judgment concluded by affirming the Tribunal's decision, allowing the loss as a trade loss and granting costs to the assessee. The second judge, S. Datta, concurred with the decision. The case exemplifies the significance of factual findings, the distinction between trade and investment transactions, and the necessity of genuine business dealings in determining tax implications.
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