1969 (3) TMI 27 - HC - Income Tax

Loss in the sale of shares - assessee s general business was in jute - since memorandum of association authorised the purchase and sale of shares, loss on sales of shares did not constitute a trading loss of the assessee

Summary

Issues:
Assessment of business loss on sale of shares for the assessment year 1959-60 as a trading loss or capital loss.

Analysis:
The case involved the assessment of a business loss claimed by a public limited company on the sale of shares for the assessment year 1959-60. The Income-tax Officer disallowed the claim, stating that the assessee was an investor in shares, not a dealer. The Appellate Assistant Commissioner upheld this decision based on the assessee's previous year's assessment, where it was concluded that the assessee was not a dealer in shares. The Income-tax Appellate Tribunal also rejected the claim, considering the shares as investments, not trading stock, due to factors like the absence of organized activity or regular course of events relating to the shares, and the assessee's primary business being in jute. The Tribunal emphasized the importance of the assessee's intention and the manner in which the transactions were described. The Tribunal's decision was based on a mix of law and fact, and the High Court found no reason to interfere, affirming the Tribunal's conclusion that the loss was a capital loss, not a trading loss.

The High Court, in its judgment, highlighted that the determination of whether a loss is related to share dealing or investment involves a mixed question of law and fact. It emphasized that if the Tribunal, after considering all relevant factors and applying correct principles, reaches a conclusion, the Court should not interfere in a reference under section 66 of the Indian Income-tax Act. The Court agreed with the Tribunal's approach in considering all aspects of the case and concluded that the loss in question was a capital loss, as determined by the Tribunal. Therefore, the Court answered the referred question in the affirmative, in favor of the revenue, and directed the assessee to pay the Commissioner's costs for the reference. The judgment was agreed upon by both judges, with the question being answered in the affirmative.