1967 (3) TMI 15 - SC - Income Tax

Whether Appellate Tribunal was justified in holding that the gain of Rs. 49, 400 made by the sale of 200 shares of Radha Films Limited was a venture in the nature of trade and whether the said amount of gain was of a capital nature or an income from business taxable under the Indian Income-tax Act - SC remand the case to HC with the direction that the High Court do refer the case to the Tribunal for recording its supplementary statement

Summary

Issues:
1. Interpretation of whether the gain from the sale of shares is of a capital nature or taxable as income from business under the Indian Income-tax Act.
2. Authority of High Court to direct the Tribunal to record additional evidence.
3. Compliance with the procedures for submitting a supplementary statement of case under section 66(4) of the Indian Income-tax Act.

Analysis:
The Supreme Court judgment involved a dispute regarding the nature of gain from the sale of shares and the authority of the High Court in directing the Tribunal to record additional evidence. The Income-tax Appellate Tribunal initially submitted a question to the High Court regarding the classification of the gain as either capital or taxable income from business under the Indian Income-tax Act. The High Court found the statement of case insufficient and referred the case back to the Tribunal for further findings, allowing the Tribunal to consider additional evidence. However, the Supreme Court held that the High Court's decision to authorize the Tribunal to collect additional evidence was inconsistent with established legal principles. Referring to a previous case law, the Supreme Court emphasized that a supplementary statement of case should only include evidence already on the record and not new evidence. Therefore, the High Court's reliance on additional evidence in reaching its decision was deemed improper.

The Supreme Court concluded that the High Court's decision was flawed due to the inclusion of additional evidence in the supplementary statement of case. As a result, the Court set aside the High Court's decision and remanded the case back to the High Court with instructions to refer the case to the Tribunal for a supplementary statement based solely on the existing record. The High Court was directed to reconsider the case based on the revised supplementary statement without considering the additional evidence collected after the original order. Ultimately, the Supreme Court allowed the appeal, emphasizing the importance of following proper procedures and excluding the supplementary statement dated October 25, 1960, from consideration. The judgment highlighted the necessity of adhering to legal principles and procedures in tax matters to ensure fair and consistent application of the law.