1961 (1) TMI 3 - SC - Income Tax

Whether the Tribunal misdirected itself in law and/or acted without any evidence in finding that the investment of the assessee in the shares of the Sholapur Mills was a capital investment and not its stock-in-trade ? Whether in any event in view of the assessments made for the years 1945-46, 1946-47 and 1947-48 and the Appellate Assistant Commissioner s order for these three years, it was open to the department to hold for the assessment years 1949-50 that the said shares do not represent the assessee s stock-in-trade ? Whether the Tribunal misdirected itself in law in omitting to consider certain material facts which were taken into account by the Appellate Assistant Commissioner and expressly mentioned in the Appellate Assistant Commissioner s order, including the fact that the assessee had been holding shares in several other companies as stock-intrade and this position has been accepted by the department although in those shares there have been no sales ? Held that - High Court was right in refusing to call for a statement of the case under section 66(2) of the Income-tax Act. The conclusion of the Tribunal was amply supported by evidence. It cannot be said that because in the previous years the shares were held to be stock-in-trade, they must be similarly treated for the assessment year 1949-50. In the matter of assessment of income-tax, each year s assessment is complete and the decision arrived at in a previous year on materials before the taxing authorities cannot be regarded as binding in the assessment for the subsequent years. The Tribunal is not shown to have omitted to consider the material facts. The decision of the Tribunal was on a question of fact and no question of law arose which could be directed to be referred under section 66(2) of the Income-tax Act. The appeal therefore fails and is dismissed with costs.

Summary

Issues:
1. Whether the shares held by the appellants were to be treated as capital investment or stock-in-trade for the purpose of income tax assessment.
2. Whether the High Court was justified in refusing to call for a statement of the case under section 66(2) of the Indian Income-tax Act.

Analysis:

Issue 1:
The case involved a dispute regarding the treatment of shares held by the appellants as capital investment or stock-in-trade for income tax assessment. The appellants, a registered firm engaged in money-lending and speculation, purchased shares of a company and maintained them in their books as stock-in-trade without selling any shares. The Income-tax Officer disallowed claimed losses, considering the shares as capital investment. However, the Appellate Assistant Commissioner held the shares to be stock-in-trade, allowing profits or losses based on the valuation method adopted by the appellants. The Income-tax Appellate Tribunal overturned the Appellate Assistant Commissioner's decision, stating that the shares were capital investment. The Tribunal's decision was based on factual inferences, including the appellants' conduct, continuous increase in shareholding, and family members' involvement in the company. The Tribunal's conclusion was supported by evidence, and it was emphasized that each assessment year stands independently, not bound by prior decisions. The Tribunal's decision was upheld, dismissing the appeal challenging the treatment of shares for income tax purposes.

Issue 2:
The appellants sought a statement of the case from the Income-tax Appellate Tribunal, which was refused by the High Court. The High Court's decision was based on the Tribunal's factual inferences and evidence supporting the treatment of shares as capital investment. The High Court's refusal to call for a statement of the case under section 66(2) of the Income-tax Act was upheld by the Supreme Court. The Supreme Court concurred with the Tribunal's findings, emphasizing that the decision was factual, not raising any legal issues for reference. The appeal was dismissed, affirming the Tribunal's decision and the High Court's refusal to call for a statement of the case.

In conclusion, the Supreme Court upheld the Tribunal's decision regarding the treatment of shares as capital investment, dismissing the appeal challenging the income tax assessment. The High Court's refusal to call for a statement of the case was justified, as the Tribunal's decision was based on factual inferences supported by evidence, without raising any legal issues for reference.