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TMI Blog1981 (8) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... also but the same is not the subject-matter of reference before us). These shares were not taken delivery of nor was the price paid. But a settlement was arrived at in February, 1952 under which the assessee-company purported to repurchase the shares at the market value then prevailing (which had gone down) and was paid an amount of Rs. 2,5l,235 by Rama Jain and Rs. 1,05,000 by R. Dalmia on account of the difference in the price of shares (along with certain debentures owned by them). After making a few adjustment.; the ITO found that the assessee had failed to account for the total of Rs. 3,59,559 in the books of account, and the ITO proposed to add this amount as profit in respect of these two transactions. The case of the assessee, however, was that the transaction of sale was completed on February 5, 1948, and all that was done by a settlement of February 5, 1952, was that Mrs. Jain and Mr. Dalmia paid the sale price contracted for originally and sold back the shares to the assessee. The claim thus being that no profit arose in the previous year for which the assessment was being made namely, 1953-54 and there was no justification for inclusion of this amount. This plea, howeve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rama Jain and Mr. Dalmia from 1948 onwards and only did it in 1952 after the alleged settlement was reached. The assessee-company also continued to show the value of the said shares in its closing stock. These shares were even shown as opening balance in the assessee's book as on January 1, 1952. There is also a mention of the letter of March 7, 1953, wherein the company had informed the ITO that " these shares could not belong to the purchaser till they pay the price thereof to the company, and took delivery from us ". In spite of these facts, which prima facie would have shown that there was in fact no sale by the assessee, the Tribunal came to the conclusion that there was a completed transaction by the agreement of February 5, 1948, amounting to a credit sale. This it did because it held that the various conditions mentioned in the said agreement, namely, that " we sell " and " we buy " and the shares so purchased will be taken delivery of by March 31, 1948, was only consistent with the fact that there had been a sale of shares. It also held that the further conditions that the dividend will be payable to Mrs. Jain and Mr. Dalmia and that interest will be paid by them after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract for the sale of specific goods and the seller is bound to do something to the goods for the purpose of putting them into a deliverable state the property does not pass unless such thing is done and the buyer has notice thereof. The Tribunal has, however, not referred to s. 21 because according to it s. 20 which provides that if there is an unconditional contract for the sale of specific goods in a deliverable state the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment of the price or the time of delivery of the goods is postponed and opined that the mere fact that the payment was not made on February 5, 1948, or that the delivery of shares was not made does not mean that the property did not pass on to the buyers in February, 1948. This, however, omits to notice that in terms of s. 21 unless shares were specified by serial numbers which can be identified it cannot be said to be a contract for sale of specified goods as contemplated by s. 21 of the Act, as they would remain un-ascertained. (See Alfred William Domingo v. L. C. De'Souza [1928] ILR 50 All 695; AIR 1928 All 481). It is by now well established ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed : " It would, therefore, follow that equitable ownership in shares can be transferred by the owner by signing a blank transfer form and handing over the transfer form along with the share scrips to the transferee. So far as the company of which the shares are the subject-matter of transfer is concerned, it would not recognise the transferee as the owner of the shares till such time as the transfer is registered and the name of the transferee is entered in its registers as the owner of those shares. It would be only after his name is entered in the registers of the company as the owner of the shares that the transferee would acquire legal ownership in the shares." (R. Dalmia's case [1971] ILR I Delhi 30). In the present case, admittedly, there is not even a suggestion that any transfer forms or the share scrips were handed over to Mrs. Jain or Mr. Dalmia by the assessee. The argument, therefore, that equitable ownership in the shares was transferred to the assessee on February 5, 1948, must be repelled. That without the specification of the shares the contract for sale for specific goods as contemplated by s. 21 of the Sale of Goods Act cannot be held to be complete was also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a contract for acquisition of shares, was entitled to claim deduction on the amount of interest paid, it meant that the court held that there was a completed transaction of sale. This argument is unacceptable because the Supreme Court specifically at p. 648 stated that it was not necessary for the court to decide the question of equitable transfer, in order to give relief to the appellant because of its decision on the other points. Rather from the judgment of the Supreme Court it is established that it accepted that the shares never belonged to Dalmia and continued to be owned by the bank because in repelling the argument that the expenditure for interest should be treated to be an expenditure of a capital nature, it observed (p. 653) that as the shares were not the stock-in-trade of the appellant (Dalmia) it could not be said that the interest paid by the assessee to the bank was an expenditure of a capital nature. The observation that the shares were not the stock-in-trade of the appellant inevitably must mean that they were, the stock-in-trade of the bank which is only consistent with the finding that the completed transaction of sale in favour of Dalmia had not taken place ..... X X X X Extracts X X X X X X X X Extracts X X X X
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