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TMI Blog1982 (5) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... in holding that the sum of Rs. 4,04,360 was not capital loss? " 1959-60: " Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the sum of Rs. 1,34,680 was not a capital loss ?" 1960-61: " Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was entitled to the carry forward of losses of the assessment years 1957-58 to 1959-60 ? " 1961-62 : " Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was entitled to the carry forward of losses of the assessment years 1957-58 to 1959-60 ? " This reference relates to the assessment years 1957-58 to 1961-62. The corresponding prev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the above mill and to my discussions with Lord Inchcape and Mr. Muir and write to place on record the following agreement that was then arrived at. (1) Mackinnon Mackenzie Co. Ltd. will tender their resignation as managing agents of the India jute Mills Co. Ltd. and Megna Mills Co. Ltd. as on the 31st March, 1956. (2) The head office...... staff, presently employed by Mackinnon Mackenzie Ltd. will be offered employment by the mills...... on exactly the same terms. (3) On the same being tendered to me on any date subsequent to the 31st March, 1956, I will purchase 13,244 ordinary shares and 30,000 deferred shares in the India jute Co. Ltd. presently owned by Mackinnon Mackenzie Co. Ltd., the price, as then agreed, being Rs. 225 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Please let me have your confirmation of the said transaction." The assessee's capital was only, as mentioned hereinbefore, Rs. 25,200 and it did not have adequate funds to make the purchases. It, however, secured the bank overdraft on the security of these and other shares and borrowed the rest, namely, Rs. 5,80,000. The shares purchased were delivered by the brokers to the assessee in 1956. In the accounting period relevant to the assessment year 1957-58, 1,500 shares were purchased on the 28th April, 1956. They remained in closing stock at the end of the accounting year and were valued at Rs. 138, per share on the 30th April, 1956, at the market price and loss of Rs. 1,30,500 was claimed on such revaluation. Daring the accounting ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22, for the assessment year 1957-58 the ITO included the sum of Rs. 1,30,500 which was allowed as a loss in the original assessment. The claim of loss for Rs., 4,04,360 for the assessment year 1958-59 and Rs. 1,34,680 for the assessment year 1959-60 was disallowed by him. He, therefore, disallowed also the claim for carry forward and set-off of the losses in the assessment years 1960-61 and 1961-62. Against the aforesaid order the assessee went up in appeal before the AAC. In his consolidated order relating to these appeals, the AAC dismissed the appeal in respect of the assessment year 1957-58 and although he allowed certain claims on other points for the assessment years 1958-59 to 1961-62, he rejected the assessee's claim for the losse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In regard to the second reason above, the Tribunal found that the letter of Bajoria to Mackinnon Mackenzie Co. Ltd., on the basis of which the assessment for 1957-58 was reopened and on which the Incometax Officer had relied for his conclusion itself made it clear that there were not only negotiations between Bajoria and the India jute Mills in 1955 but that even at the time the idea was that the shares should be taken by Bajoria or his friends and associates. The genuineness of the letter or the recital therein purporting to record an agreement arrived at in March, 1955, and reference to earlier correspondence of 1955 had not been doubted nor could that be doubted without an examination of Mackinnon Mackenzie and Co. Ltd., in the matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness and that the intention to help out Bajoria was irrelevant in considering the assessability of the profits or allowability of the losses in the transaction. According to the Tribunal so long as the transaction had been actually put through the assessee would be entitled to claim the losses, just as it might have been assessable had there been profit. The Tribunal found that the shares were purchased at the market value (not at inflated rates) on borrowed money, held for a very short while and then disposed of and having regard to the fact that the assessee was a dealer in shares it found it difficult to escape the conclusion that the losses were revenue and not capital losses. The Tribunal held that the assessee was entitled to succeed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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