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TMI Blog1967 (8) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... iz., 139 debentures in Malwa Sugar Mills Company Limited (loss Rs. 646) ; 200 preference shares in the United Collieries Limited (loss Rs. 4,000) and 2,500 ordinary shares in Karamchand Thapar and Sons Limited (loss Rs. 1,04,592). The Income-tax Officer was of the opinion that the assessee was not a dealer in shares and the sales of the shares in which the losses were alleged to have been incurred were not genuine for, inter alia, the following reasons : (i) The shares sold during the year were mostly shares of companies managed by the assessee and as the managing agents it was incumbent on the assessee to hold the required number of shares in these companies. The sales were to associated or managed companies and even when sold to regular brokers, the shares ultimately were taken over by these latter companies. (ii) The shares had been shown under the head "investment "in the assessee's balance-sheet and the resultant loss has been shown as loss on sale of assets in its profit and loss account. (iii) The long period between the purchases and sales of the shares and debentures indicated that these were not acquired for the purpose of the assessee's business as a dealer in shares. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sale of the shares of the above named three companies and that such losses should have been allowed in full. The Appellate Assistant Commissioner disagreed with the Income-tax Officer's finding that the assessee was not a dealer in shares and following his own decision in the assessee's appeals for the assessment years 1932-53 and 1953-54, he held that the assessee was a dealer in shares. He also disagreed with the Income-tax Officer's further finding that the sales of these shares are not genuine sales. He then proceeded to consider whether the aforesaid shares were sold by the assessee as its stock-in-trade or whether any of these shares formed part of its capital investment in order to determine whether the losses were to be allowed as revenue loss or disallowed as capital loss. So far as the losses claimed in respect of the sales of the debentures in Malwa Sugar Mills Limited and of the preference shares in United Collieries Limited, the Appellate Assistant Commissioner was of the view that there was no reason for disallowing the claim in respect of those sales. The sales were made shortly after the purchase, the purchasers were separate and distinct entities and there wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sale of these shares. On further appeal by the assessee to the Tribunal against the disallowance by the Appellate Assistant Commissioner of its claim for loss on the sale of the shares of Messrs. Karamchand Thapar & Sons Ltd., the Tribunal observed as follows : "We will take it for granted, since the Appellate Assistant Commissioner has so observed, that the assessee is a dealer in shares. We will also take it for granted that so far as the sales of shares. in question are concerned, they are genuine sales. The question, however, remains as to whether it was the sale of stock-in-trade or merely a change of investments and hence the loss which a accrued was a capital loss. In order to judge the nature of the dealings as to whether it was a trading deal or an investment deal, one has primarily to see the way in which the assessee has himself treated his stocks, namely, whether as investment or as stock-in-trade. In this particular case, we find that the shares have been shown under the head ' investment ' in the balance-sheet and in fact the loss accruing to the assessee on the sale of these shares has been shown in the profit and loss account as a loss on the sale of assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s also for a very long time and as he had allowed the loss claimed on the sale of these shares, he was not justified in disallowing the claim for loss on the sale of the shares in Karamchand Thapar & Sons Ltd. As neither the Appellate Assiistant Commissioner or the Tribunal had any occasion to consider the case of the shares of Yuvraj Sugar Mills and as they have decided the question on, grounds different from those of the Income-tax Officer, it is not necessary to notice this argument of Mr. Deb any further. Mr. Deb next contended that having accepted the assessee as a dealer in shares and the genuineness of the sales of the shares by the assessee, neither the Appellate Assistant Commissioner nor the Tribunal was justified in finding that the shares in Karamchand Thapar & Sons Ltd. were held as investment and not as its stock-in-trade. In coming to his conclusion that the aforesaid shares were held as investment, the Appellate Assistant Commissioner had relied on the following findings: (i) That the assessee had purchased 100 such shares on the 31st March, 1950, at Rs. 75 per share while the market price of the share was Rs. 50 per share. (ii) That the 2,400 shares were acquir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limits. The assessee or the revenue can contend that the inference has been drawn on considering inadmissible evidence or after excluding admissible, and relevant evidence ; and if the High Court is satisfied that the inference is the result of improper admission or exclusion of evidence, it would be justified in examining the correctness of the conclusion. It may also be open to the parties to challenge a conclusion of fact drawn by the Tribunal on the ground that it is not supported by any legal evidence ; or that the impugned conclusion drawn from the relevant facts is not rationally possible ; and if such a plea is established the court may consider whether the conclusion in question is not perverse and should not, therefore, be set aside. It is within these narrow limits that the conclusion of fact recorded by the Tribunal can be challenged under section 66(1) Such conclusions can never be challenged on the ground that they are based on misappreciation of evidence. " In this case the above conclusion drawn the Appellate Assistant Commissioner had been accepted and adopted by the Tribunal. In order to test the correctness or validity of the conclusion drawn by the Appellate A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n shares or that the shares were entered in the assessee's stock account, were not of any importance in the circumstances of the case and could not alter the real character of the transaction, As we accept this contention of Mr. Deb, it is not necessary for us to consider his alternative submission that tinder the provisions of the Indian Companies Act, 1913, the assessee had properly shown his stock of shares as " investment at cost " in its balance-sheet. As regards the second ground of the Tribunals' decision, Mr. Deb contended that the mere fact that these shares had been held for a long period without sale would not convert them into investments. He pointed out that the Yuvraj Sugar Mill shares had also been held for a long period but the income-tax Officer had allowed the loss on these shares. Mr. Deb objected to the finding of the Tribunal that these shares had not been sold when there was a good and favourable market for them, which finding constituted the third ground of its decision. He argued that as the shares were the shares of a private limited company which were never quoted in the stock exchange, the Tribunal had no material to come to the above finding. The Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,400 of these shares were acquired by the assessee in 1941, the year in which Karamchand Thapar & Sons Ltd. was incorporated ; that the assessee became the managing agents of that company and continued as such till the year 1956 ; that a further 100 shares were purchased in 1950, and that the whole lot of 2,500 shares were sold in March, 1965. We have accepted Mr. Deb's contention that the other conclusions arrived at either by the Appellate Assistant Commissioner or the Tribunal could not be sustained. From the admitted facts the Appellate Assistant Commissioner has drawn the conclusion that these shares were acquired in connection with the acquisition or retention of the managing agency of Messrs. Karamchand Thapar & Sons Ltd. We have already rejected Mr. Deb's argument that such an inference was based on no material or was perverse. If the purpose of the acquisition of the shares was to facilitate the acquisition or retention of the managing agency and if these shares had been held by the assessee for a long period of 14 years without sale, then the conclusion that the shares did not constitute the assessee's stock-in-trade in its shares dealing business could not be held to be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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