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TMI Blog2009 (8) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... ills. As of 2005, the company had the bank liability to the tune of approximately Rs.140.00 crores. In the said circumstances, the company proposed to increase the share capital. After negotiations with Unit Trust of India Investment Advisory Services, the appellant allotted to them 8,75,000 equity shares of the face value of Rs.10 each and at a premium of Rs.175/- per share, as evidenced by the agreement dated 19.05.2005. On 19.05.2005, the shares were allotted to the Unit Trust of India Investment Advisory Services Limited at the premium of Rs.175/- per share. The allotment was at a discount of approximately Rs.60/- per share against the trading in stock exchange on that date. At that time, certain differences arose between two groups of promoters, viz., the appellant group and the group comprising of P.K.Ganeshwar and M.Rathnasamy. Finally, a resolution was arrived at through the intervention of UTI Venture Funds Management Company Private Limited, the Manager for the Unit Trust of India Investment Advisory Services Ltd. As per the agreement, the UTI Venture Funds Management Company Private Limited would facilitate the sale of the whole shares held by the two dissenting pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the written submissions placed before it. The assessing authority, in paragraph 5 of the assessment order, has observed that the appellant had not undertaken any activity in the course of business and hence, the amount could not be assessed as income from business, but should be assessed under the head 'other sources'. This finding of the assessing authority clearly accepts the position that the receipt could not relate to any specific source or any income earning activity, that the receipt did not relate to any regular activity carried on by the appellant; and that in the absence of any source to which it can be claimed, it cannot be assessed to income. He further contended that the receipt, if at all, can be treated as casual income or even windfall, such receipt cannot be assessed to tax. He further contended that the Commissioner of Income Tax (Appeals) in paragraph 4.5.4 of its order, observed that at the time of escrow agreement the price of the shares was less than Rs.250/- per share and further observed that because the appellant had agreed to protect the price of the share at Rs.250/- per share he had to take steps to prevent a further fall in the share price and to br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Wardekar, 283 ITR 432; 21. CIT v. Industrial Credit and Development Syndicate Ltd., 285 ITR 310. 22. Addl. CIT v. Rama Leasing Co. P. Ltd., (2008) 20 SOT 505. 5. Relying on these decisions, the senior counsel contended that the transaction of the present nature cannot be regarded as a trade and the receipt of transaction is not available for taxation. 6. In the case of Commissioner of Inland Revenue v. Reinhold, Vol. 34 Tax Cases 389 the Director of the company carrying on the business of the warehousemen, bought four houses in January 1945, and sold them at a profit in December, 1947. He also admitted that he had bought the property with a view to resale and had instructed his agents to sell whenever a suitable opportunity arose. In the circumstances, it was held that the fact that the property was purchased with a view to resale did not of itself establish that the transaction was an adventure in the nature of trade, and that the Commissioners were justified in treating the profit in question as not assessable to income tax. 7. Ramnarain Sons (Pr.) Ltd. v. CIT, Bombay, 41 ITR 534 was cited and relied on the observations of the Court that by purchasing the shares far in exce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Income Tax Act, 1961, income of every kind, which is not to be excluded from the total income under the Income Tax Act shall be chargeable to income tax under the head, 'income from other sources' if it is not chargeable to income tax under any of the heads specified in section 14A to E. 11. Hence, whatever income received by the appellant which is not to be excluded from the total income under any of the provisions of the Act and the receipt is not chargeable to income tax under any of the heads specified in items A to E of section 14 would come within the purview of 'income from other sources' and it is chargeable to tax. 12. Heard the learned counsel on either side and perused the materials available on record. 13. From the above narration of facts, it is clear that the claim of the assessee that the receipt is not income, but capital receipt and that the receipt of a casual and non-recurring nature having been rejected uniformly from the assessing officer to the Tribunal, the correctness of the order of the Tribunal holding that the sum was taxable is put in issue in this appeal. 14. The meaning of the term income has not been exhaustively stated in the Income-tax Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticular legislative practice either in the United States or in the Commonwealth of Australia but because such was the normal concept and connotation of the ordinary English word income. Its natural meaning embraces any profit or gain which is actually received. This is in consonance with the observations of Lord Wright to which reference has already been made. . . . The argument founded on an assumed legislative practice being thus out of the way, there can be no difficulty in applying its natural and grammatical meaning to the ordinary English word income. As already observed, the word should be given its widest connotation in view of the fact that it occurs in a legislative head conferring legislative power. 16. The apex court, in the case of G. R. Karthikeyan, (1993) 201 ITRA 866 went on to hold that, Since the definition of income in section 2(24) is an inclusive one, its ambit, in our opinion, should be the same as that of the word income occurring in entry 82 of List I of the Seventh Schedule to the Constitution (corresponding to entry 54 of List I of the Seventh Schedule to the Government of India Act). 17. In the case of Krishna Menon, (1959) 35 ITR 48 (SC), the court he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.30 lakhs as commission. The appellant had contact with M/s.CLSA India Limited, the broker and had arranged for the delivery slips of the shares to the broker, which is evident from the letter dated 27.08.2005 to the Bank of Nova, Scotia, the escrow agent. Though the action of the appellant might have been to protect the Company by entering into the Agreement, the appellant ventured to sell the shares of the other promoters of the Company assuring the agreed price and undertaking to compensate them in case the shares are sold less than the agreed price. Thus, it is evident that the appellant had played the roll in the overall equity shares diverting activity either directly or through broker for obtaining best price. Ultimately, the venture proved that the appellant not only gained control of the mill, but also received substantial amount. Therefore, the profit on the sale of shares was a calculated move and it cannot be regarded as a wind fall. The surplus amount thus realised by the assessee is an income. If the assessee is not entitled to the surplus amount, the amount certainly would have become taxable in the hands of the divesting promoters. The case laws relied on ar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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