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TMI Blog2004 (8) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... questions of law referred to us in the affirmative, i.e., in favour of the Revenue and against the assessee. - - - - - Dated:- 12-8-2004 - Judge(s) : R. K. AGARWAL., K. N. OJHA. JUDGMENT The Income-tax Appellate Tribunal, Allahabad, has referred the following two questions of law under section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), for the opinion of this court: "1. Whether, on the facts and in the circumstances, the Tribunal was justified in rejecting the assessee's claim that Rs. 23,158 be allowed while computing the assessees' total income as the said expenses had been incurred by it in running the company? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was just ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicant on the acquisition of 4,500 ordinary shares of National Insurance Company Ltd., by the Government of India on account of the nationalisation of the insurance company. The Government of India has paid a sum of Rs. 6,05,814. The book value of these shares was Rs. 5,82,742. According to the Income-tax Officer, it was surplus chargeable to capital gains under section 45 of the Act and as shares were kept for more than five years, "it would be subjected to long-term capital gains". The Income-tax Officer, while making the assessment did not allow the business expenditure of Rs. 23,157.84, as according to him the applicant was not carrying on any business and these expenses have not been incurred for earning dividend income. In the appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the head "Income from other sources". Moreover, under section 37 of the Act, such expenditure which has been laid out or expended wholly and exclusively for the purposes of business or profession is to be allowed deduction while computing the income chargeable under head "Profits and gains of business or profession". He submitted that as in the assessment year in question, there was no income under the head "Profits and gains of business or profession", as the applicant was not carrying on any business, expenditure has rightly not been allowed. So far as the question of capital gains is concerned, he submitted that on the nationalisation of National Insurance Company Ltd., by the Government of India, the applicant had received a sum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he applicant in respect of 3,500 shares of National Insurance Company Ltd., is concerned, it may be mentioned here that the amount of compensation was quantified by the Union of India at Rs. 6,05,814 and the book value was Rs. 5,82,742. Thus, the surplus is liable to be treated as capital gains. Merely because the applicant had purchased shares of M.P. Industries or had taken shares of M.P. Industries in lieu of the compensation amount till such time it is sold or transferred by the applicant, the question of any loss occurring to the applicant would not arise. Thus, the Tribunal was justified in holding the surplus of Rs. 23,072 as capital gains liable to tax as a long-term capital gains. In view of the foregoing discussions, we answer b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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