9911796707
|
Home
Issues Involved:
1. Whether the assessee was a dealer in shares. 2. Whether the sales of shares were genuine. 3. Whether the losses on the sale of shares were capital losses or revenue losses. Issue-Wise Detailed Analysis: 1. Whether the assessee was a dealer in shares: The Income-tax Officer (ITO) concluded that the assessee was not a dealer in shares based on several factors, including the long holding periods of the shares, the description of shares as investments in the balance-sheet, and the nature of the transactions. The Appellate Assistant Commissioner (AAC) disagreed, affirming that the assessee was a dealer in shares by referencing the assessee's past assessments for the years 1932-53 and 1953-54. The Tribunal accepted this finding, assuming for argument's sake that the assessee was indeed a dealer in shares. 2. Whether the sales of shares were genuine: The ITO questioned the genuineness of the sales, citing reasons such as the sales being to associated or managed companies and the shares being ultimately taken over by these companies. The AAC disagreed, finding no evidence to suggest the sales were not genuine. The Tribunal also assumed the genuineness of the sales. 3. Whether the losses on the sale of shares were capital losses or revenue losses: The ITO disallowed the losses claimed on the sale of shares, asserting they were not genuine and were part of a scheme to create artificial losses. The AAC allowed the losses on the sales of debentures in Malwa Sugar Mills Limited and preference shares in United Collieries Limited but upheld the ITO's disallowance of the loss on the sale of shares of Karamchand Thapar and Sons Limited. The AAC concluded that these shares were held as investments and not as stock-in-trade, based on factors such as the long holding period and the role of the shares in the acquisition or retention of the managing agency. The Tribunal upheld the AAC's decision, emphasizing that the shares were shown as investments in the balance-sheet, held for a long period, and not sold during favorable market conditions, indicating they were investments rather than stock-in-trade. The Tribunal concluded that the loss was a capital loss and not a revenue loss. Conclusion: The High Court affirmed the Tribunal's decision, agreeing that the shares were acquired in connection with the acquisition or retention of the managing agency and held for a long period, thus constituting capital investments. The Court held that the loss on the sale of these shares was rightly disallowed as a capital loss. The question of law referred to the Court was answered in the affirmative and against the assessee. The Commissioner of Income-tax was entitled to the costs of the reference.
|
