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1971 (1) TMI 33 - HC - Income TaxLoss in dealing with shares - Whether there was any evidence and/or material before the Tribunal to hold that the business of dealing in shares was not being carried on by the assessee in the year of account - Whether assessee is entitled to the loss as business loss in the year of account
Issues Involved:
1. Whether the Tribunal was right in holding that the business of dealing in shares was not being carried on by the assessee in the year of account. 2. Whether the assessee is entitled to the loss of Rs. 44,190 as business loss in the year of account. Issue-Wise Detailed Analysis: 1. Whether the Tribunal was right in holding that the business of dealing in shares was not being carried on by the assessee in the year of account: The Tribunal initially concluded that the assessee was not carrying on any business in the year of account pertaining to the assessment year 1954-55. This conclusion was based on a period of inactivity from 1948-49 to 1953-54. However, the Tribunal's new statement of the case dated 8th June 1970, after considering the facts from 1955-56 to 1958-59, held that the assessee was a dealer in shares for the assessment year 1954-55. The Tribunal's new finding was against the department, whereas the previous finding was in favor of the department. The court noted that the Tribunal erred in considering facts from the years 1959-60 and 1960-61, which it was expressly asked not to do. The Tribunal also erred in giving a fresh finding that the assessee was a dealer in shares for the assessment year 1954-55, as the court had only asked for a fresh statement of the case and not a new finding. The court decided not to send the case back to the Tribunal for a fresh statement, opting instead to exclude the facts and findings pertaining to the years 1959-60 and 1960-61 and to decide the matter independently. The court reviewed the facts from 1942-43 to 1947-48, during which the assessee was consistently found to be a dealer in shares. From 1948-49 to 1953-54, there was a period of inactivity, but no evidence suggested that the assessee had ceased to do business. The subsequent years 1955-56 and 1957-58 showed that the assessee resumed business, indicating that the period of inactivity did not signify an intention to cease business. The court concluded that the assessee was a dealer in shares during the assessment year 1954-55. 2. Whether the assessee is entitled to the loss of Rs. 44,190 as business loss in the year of account: The assessee claimed a loss of Rs. 44,190 incurred from the business of purchase and sale of shares for the assessment year 1954-55. The Tribunal initially disallowed this loss, but the new statement of the case recognized the assessee as a dealer in shares for the assessment year 1954-55, thereby allowing the loss. The court examined the nature of the shares sold in the year of account, noting that they were purchased in 1946 when the assessee was a dealer in shares. There was no evidence to suggest that these shares, initially held as stock-in-trade, had been converted into capital investments. The court emphasized that the origin of the holding as stock-in-trade was established, and it was for the department to prove any change in nature, which it failed to do. The court also addressed the department's contention that each year of assessment is a separate legal entity and that findings from previous years are not binding. While acknowledging this, the court clarified that previous findings could be considered as good and cogent evidence. The court cited the Supreme Court's decision in Investment Ltd. v. Commissioner of Income-tax, which supported this view. The court rejected the department's argument that the assessee should be considered a dealer only in shares of one company and not others. This argument was not raised at any earlier stage and did not arise from the questions referred for decision. The court concluded that the assessee was a dealer in shares for the year of account 1954-55, and the loss of Rs. 44,190 was a business loss, making it allowable. Conclusion: - Answer to Question No. 1: No. - Answer to Question No. 2: Yes. The Commissioner was ordered to pay the costs of the assessee.
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