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Interpretation of whether the loss incurred from the sale of shares was of a revenue or capital nature. Analysis: The case involved a reference under section 256(1) of the Income-tax Act, 1961, concerning the treatment of a loss incurred by the assessee from the sale of shares. The assessee, a colliery company, purchased 7,000 unquoted shares and subsequently sold them, incurring a loss. The Income-tax Officer treated the income received as dividend and the loss as a capital loss, while the Appellate Assistant Commissioner considered the loss as a revenue loss. The Tribunal upheld the revenue's appeal, determining the loss to be of a revenue nature. The central question was whether the transaction constituted an adventure in the nature of trade or not. The revenue contended that the transaction was not a trade venture due to various factors, such as the isolated nature of the transaction, the shares being unquoted, and the shares not being transferred to the assessee's name. The revenue relied on legal precedents to support their argument, emphasizing the need to consider all relevant facts and circumstances in determining the character of a transaction. The court considered the facts of the case, including the company's status as a limited company, the purchase of shares cum-dividend, and the quick sale of shares after dividend declaration. The court noted that the shares were held in the bank's name, indicating a short-term holding intention. Based on the overall impression that the primary objective was to profit quickly from dividends, the court concluded that the transaction was of a revenue nature, not a capital investment. The court referred to legal principles regarding the distinction between capital accretion and profit-making transactions, emphasizing the need to assess the intention behind the purchase and sale of assets. Ultimately, the court ruled in favor of the assessee, determining that the loss from the share sale was of a revenue nature. The judgment was unopposed, and no costs were awarded. In agreement with the primary judgment, the second judge concurred with the decision without additional comments.
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