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TMI Blog1971 (1) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... vely, could be allowed as deductions as business losses while determining his total income for the relevant assessment years ? " The assessee was a partner in three registered firms at the relevant time and received income from property, dividends and business. We are concerned in this reference with the loss suffered by him on the sales of certain shares in his individual capacity. The sales were effected in Samvat years 2011, 2013 and 2114, corresponding respectively to assessment years 1956-57, 1958-59 and 1959-60. The assessee died on the 18th of July, 1964, and is represented by his son, Karsondas. The assessee has been dealing in shares since 1941 and for the assessment years 1942-43 to 1947-48 the profits which he made on the sale of shares were taxed as business profits in his hands. In the assessment years 1948-49 to 1953-54 there were no sale transactions. In the assessment year 1954-55, the assessee showed a loss of Rs. 44,190 on the sale of shares but that loss was disallowed by the Appellate Tribunal on the ground that for the particular year the assessee was not a dealer in shares. In a reference arising out of the judgment of the Tribunal (I.T.R. No. 30 of 1963), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the accounting year from which it was clear that the transactions were not effected with a view to carrying on business in the purchase and sale of shares, but were effected with a view to bringing down the incidence of tax. These reasons have been given in detail by the Income-tax Officer in his order for the assessment year 1958-59. In an appeal filed by the assessee, the Assistant Commissioner confirmed the assessment orders passed by the Income-tax Officer on the following grounds : (1) That the bulk of the share holdings of the assessee were in private limited companies and only a small portion represented investments in public companies, (2) that in the assessment year 1958-59, shares which were purchased for Rs. 1,16,735 were sold for Rs. 25,175 and the sale proceeds were not utilised for purchasing shares of any well-known company, and (3) that during the three years under consideration, though there was a large expansion in the corporate sector, the sale proceeds were not utilised by the assessee for purchasing shares in such companies which a dealer would normally do. Besides, if the appellant had been a dealer in shares, he would have certainly purchased shares of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er in shares in the relevant assessment years and that therefore he could claim the losses as business losses. At annexure " A " to the statement of the case is an agreed statement of the transactions effected by the assessee from assessment years 1942-43 to 1962-63. It shows that from the assessment year 1942-43 till and inclusive of the assessment year 1947-48 the profits made by the assessee on the sale of shares were taxed in his hands as business profits. From the assessment years 1948-49 to 1953-54 there were no transactions. In 1954-55 the assessee claimed a loss of Rs. 44,190 which was disallowed by the Tribunal but which has been allowed by us in the judgment just delivered in I. T.R. No. 30 of 1963. For the assessment year 1955-56 the assessee claimed a loss of Rs. 2,273 which was disallowed by the Income-tax Officer but was allowed by the Appellate Assistant Commissioner. The department acquiesced in that order. In 1957-58 the assessee showed a profit of Rs. 1,155 which was taxed in his hands as a business profit which had accrued to him on the sale of shares. Similarly, in 1960-61 a profit of Rs. 3,313 was taxed as a business profit. Annexure " A " contains a remark tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be of a capital nature. In the balance-sheet the company had valued the securities at cost and had described its stock as " investment ". It was held by the Supreme Court that, though an order made in assessing the income of one year was not conclusive in other years, that finding is " good and cogent evidence " of the nature of transaction in shares in the other accounting years. It was further held that from the circumstance that the company did not effect any sales between 1948 and 1951, no inference might arise and that the loss suffered by the company for the assessment year 1953-54 was a revenue loss and not a capital loss. It is thus clear that in failing to consider the previous and subsequent orders of assessment, the Tribunal has ignored " good and cogent evidence " which was before it. Therefore, the finding recorded by it that : " . . . except for the fact that the shares were shares of public limited companies, there is no other circumstance to support the assessee's claim. " and that : " . . . there is nothing to show that the purchases were effected with a view to treating the shares as trading stock, nor is there anything to show that the sales were effe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indicate how the matter is to be viewed in the context of facts. The problem must be approached in such cases in the light of the intention of the assessee, having regard to the legal requirements which are associated with the concept of trade or business. " It is, therefore, not possible to accept the contention advanced by the learned counsel on behalf of the department that the finding recorded by the Tribunal that the assessee was not a dealer in shares during the relevant assessment years is a pure question of fact with which we have no jurisdiction to interfere. The judgment of the Tribunal also contains a material mis-statement that " it is no longer in dispute that the assessee was not a dealer in shares at least in so far as the shares in the private limited companies were concerned ". There never was any occasion to raise such a dispute and, in fact, no one had ever raised it. There were only two transactions of sale of shares in private limited companies during the three relevant years and out of these only one had resulted in a loss. That was the sale of 200 shares in International Radio and Television Co. Pvt. Ltd. in the assessment year 1958-59, on which the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent year 1958-59 only. In that year, except for the sale of 200 shares of International Radio Television Co. Pvt. Ltd. dated 9th of May, 1967, the other sales were effected within two months preceding the close of the year. But that is not true in regard to the sales effected in the assessment years 1956-57 and 1959-60. In 1956-57, the four classes of shares were sold in March, May and November, 1955. In the assessment year 1959-60, the sales were all effected in February, 1958, except one sale dated November, 1957. Secondly, we see no justification for the argument that the dominant motive of the sales effected by the assessee was to save tax and not to trade in shares. It may be true to say that by selling some of his holdings, the assessee was able to reduce his profits and thereby the quantum of tax. But then the motive to cut losses is always an important consideration for any one dealing in shares. In fact, hardly any trading or business activity is uninfluenced by the consideration that if you can do so lawfully, you must reduce your tax burden. Generally, profit-motive is the hallmark of these activities. As observed by the Supreme Court in Commissioner of Income-tax v. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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