1989 (2) TMI 5 - SC - Income Tax

Tribunal uphold that loss in sale of shares was a Trading loss - order of tribunal is justified - no question of law arises - it is not necessary for Tribunal to state in its judgment specifically or in express words that it has taken into account the cumulative effect of the circumstances

Summary

Issues:
1. Whether the Tribunal should have referred certain questions to the High Court for determination.
2. Whether the transactions entered into by the assessee in the purchase and sale of shares were genuine commercial transactions.
3. Whether the Tribunal's finding that the assessee entered into the transactions of purchase and sale of shares in the course of its business as a dealer in shares was based on evidence.

Analysis:

The case involved an appeal filed by the Commissioner of Income-tax against an order of the Calcutta High Court declining to direct the Income-tax Appellate Tribunal to refer certain questions for determination. The respondent-assessee claimed deductions for losses on the sale of shares of two companies, Bharat Starch and Chemicals Ltd. and Greaves Cotton and Co. Ltd. The Income-tax Officer disallowed the losses, alleging that the transactions were not genuine and were made to claim losses artificially. The Appellate Assistant Commissioner upheld the disallowance, considering the shares as investment losses. However, the Tribunal ruled in favor of the assessee, stating that the transactions were genuine commercial transactions made in the normal course of business.

The Commissioner applied for a reference to the High Court, which was declined by the Tribunal. The High Court also rejected the application, leading to the current appeal. The key questions raised were whether the Tribunal should have referred the questions for determination and whether the transactions were genuine commercial transactions made in the course of the assessee's business as a dealer in shares. The principles established by previous judgments emphasized that the Tribunal's findings on whether a loss is a trading loss or a capital loss are primarily factual and should not be interfered with unless based on irrelevant material or unreasonable conclusions.

The Supreme Court analyzed the Tribunal's decision and found that all relevant circumstances were considered, relevant material was taken into account, and the decision was not perverse. The Court concluded that the Tribunal had appropriately assessed the facts and circumstances, including the assessee's previous treatment as a dealer in shares, in determining the nature of the losses. The Court dismissed the appeal, affirming the Tribunal's decision that the losses on the sale of shares were genuine commercial transactions made in the normal course of business.

In conclusion, the Supreme Court upheld the Tribunal's decision, emphasizing that the Tribunal's findings were based on relevant material and not unreasonable. The Court rejected the appeal and dismissed it with costs, affirming the Tribunal's ruling in favor of the assessee regarding the losses on the sale of shares.