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TMI Blog1986 (3) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee, which were being held by the trust estate were transferred. Meryl Investment Co. Ltd. was wound up in 1940 and another company known as " Meryl Co. Ltd. " was incorporated. The new company took over all the shares of the assessee which became a 100% subsidiary of Meryl Co. Ltd. In 1946, the assessee floated a company of the name " Clive Row Investment Holding Co. Ltd ". Shares held by the assessee in the Yule group of companies were transferred by the assessee to the new company and, in consideration, the entire fully paid-up share capital of the new company was transferred to the assessee. The assessee continued to hold the shares of Clive Row Investment Holding Co. Ltd. till 1954 when the said Clive Row Investment Holding Co. Ltd. became a public limited company and its shares were listed in the stock exchange. In the assessment years 1956-57, 1957-58 and 1958-59, the respective accounting years ending on the 31st March of the calendar years 1956, 1957 and 1958, the assessee sold the shares of Clive Row Investment Holding Co. Ltd. The said sales resulted in profit. In the said three assessment years, the assessee was assessed to income-tax. In its return of income t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could not be held to be a dealer in the said shares, inasmuch as there was no need for the assessee to form a subsidiary and then have the shares of the subsidiary transferred to it. If the assessee wanted to trade in the shares held by it, the assessee could have done so without setting up a subsidiary. The Tribunal also held that the conversion of the subsidiary into a public limited company could not be held to be a transaction in the nature of trade and when the subsidiary company, viz., Clive Row Investment Holding Co. Ltd., became a public limited company, its shares were listed in the stock exchange in the usual course. The Tribunal noted that after holding the shares of the subsidiary for nearly ten years, the assessee sold the same in the three assessment years. The Tribunal came to the conclusion that the transactions in the shares could not be described as trade or an adventure in the nature of trade. The Tribunal found that the transactions were had only with the object of rearrangement of the shareholding of the assessee. The surplus arising from the sale of the shares was held by the Tribunal to have arisen on capital account. It was contended by the Revenue before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal have not been challenged and they have become final. On the said facts, the Tribunal had drawn a conclusion and it could not be said that the conclusion drawn by the Tribunal on the facts found was perverse or contained such fundamental error which would merit interference by this court. The law on the question is well-settled. In support of the respective contentions of the parties, several decisions were cited at the Bar, which are considered hereinafter : (a) G. Venkataswami Naidu Co. v. CIT [1959] 35 ITR 594 (SC). This decision was cited for the observations of the Supreme Court that in reaching the conclusion that the transaction is an adventure in the nature of trade, the Tribunal had to find primary evidentiary facts and then apply the legal principles involved in the expression " adventure in the nature of trade " used by section 2, sub-section (4). It was patent that the clause " in the nature of trade " postulated the existence of certain elements in the adventure which in law would invest it with the character of a trade or business, and that would make the question and its decision one of mixed law and fact. (b) Calcutta Discount Co. Ltd. v. ITO [1961] 41 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessee had initially obtained the shares in the course of investment and at no point of time the assessee had acted as a dealer in shares. Following the decision of the Supreme Court in Karam Chand Thapar Bros. Ltd. [1971] 82 ITR 899, it was held by this court that on the specific finding of the Tribunal that the sale had not been effected in the course of the assessee's business, it could not be held that the conclusion of the Tribunal was not correct. (e) CIT v. Guest Keen Nettlefold Ltd. [1978] 115 ITR 205 (Cal). In this case, the assessee, a sterling company, had a controlling interest in an Indian company. The Indian company with the permission of the authorities concerned made a rights issue of capital. The assessee, in order to maintain its controlling interest, had to subscribe to the rights issue and for that purpose obtained an overdraft from an Indian bank. For the purpose of liquidating the said overdraft, the assessee sold a part of the shares, which resulted in a surplus. The Income-tax Officer sought to tax the surplus as business income of the assessee. The Appellate Assistant Commissioner and the Tribunal held that the assessee was never a dealer in s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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