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TMI Blog1990 (8) TMI 183X X X X Extracts X X X X X X X X Extracts X X X X ..... nto a private limited company at a later date. On 3rd December, 1971 the shares which were contributed between the partners were transferred to a Limited Company known as SJS Investment Pvt. Ltd. and consideration in respect of shares was credited by the said company to the account of the respective partners. The assessee had filed a copy of its account in the books of the said company which showed that the assessee's account was credited by Rs. 4,88,016 which represented the market value of the various shares contributed by the assessee. It was contended for the assessee that there cannot be any profit out of this transaction which may be taxed as capital gains. In that connection, reliance was placed on the case of CIT v. Bai Shirinbai K. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d order of the CIT (Appeals). In the present assessment order, the ITO has mentioed that the learned representative for the assessee has stated that the shares were converted into stock-in-trade on 3rd December, 1971, and the same were handed over to M/s. SJS Investment Pvt. Ltd. by blank transfer after 2-3 days. No exact date of transfer was, however, given. It was observed by the ITO that the assessee is not trading in shares, the mere act of the assessee converting the shares into stock-in-trade is not sufficient to say that the shares are the stock-in-trade of the assessee. He also observed that the assessee has not done any trading activity either before or after. He opined that the assessee clearly sold his shares to a Limited Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd ample force in what has been contended on behalf of the revenue. The term 'stock-in-trade' presupposes the existence or coming into being of some business activity. In trade and business there is a continuity of operations to regard an activity as business, there must be course of dealings continuously or contemplated to be continued with a profit motive. In the instant case, except for the alleged conversion of shares into the stock-in-trade of the assessee, there was no trading activity either before such conversion or thereafter. There is no supporting evidence to support the assessee's version except a bald assertion by himself. In the given circumstances, it is hard to believe this version of the assessee. We accordingly, find no me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ares is governed by the provisions contained in the Sale of Goods Act, and the sale becomes complete as soon as the shares are delivered to the purchaser. He has pointed out that in the instant case the share scrips were delivered along with blank transfer forms and the purchaser company had credited the assessee's account with the sale price. As such, he urged that the sale became complete during the assessment year in question and even if the purchaser's name was registered at a later date in the register of the company, it can be of no assistance to the assessee. 8. We have given careful consideration to the rival submissions. It is not in dispute that the accounting period of the assessee relevant to the assessment year in question wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and securities treated as stock-in-trade by the parties hereto shall be deemed to belong to the new company and consequently all the benefits accruing thereto shall belong to the new company. " In view of the foregoing discussions, we find no force in the aforesaid plea of the assessee and reject the same. 10. It was next argued that no valid transfer of the shares was made and as such, no capital gains can be said to have legally accrued to the assessee. In that action reference has been made to section 108 and sub-sections (1A) and (1B) of the Indian Companies Act. It was argued for the assessee that every instrument of transfer of shares has to be in the prescribed form and any other form of transfer would be invalid. It has been po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he limited company. This, according to him, does not amount to a physical transfer or a transfer in the commercial sense of the term and, therefore, the amount is not chargeable as capital gains. In support of this contention, he referred to the case of CIT v. Sir Homi Mehta's Executors [1955] 28 ITR 928 (Bom.). In that case a group of individuals, who were carrying on business in shares, transferred their holding of shares in several joint stock companies to a private limited company formed by them and entered in the books of the company the price of the shares ruling in the market on the date of the commencement of its business. The market value of the shares was in excess of the cost to the transferors. When the matter came up before t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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