Commissioner Of Income Tax, Nagpur v. Sutlej Cotton Mills Supply Agency Ltd

COMMISSIONER OF INCOME TAX, NAGPUR SUTLEJ COTTON MILLS SUPPLY AGENCY LTD. July 25, 1975 [A. N. RAY C. J., K. K. MATHEW, V. R. KRISHNA IYER AND S. M. FAZAL ALI, JJ.] lncome~tax-Jurisdiction of a High Court on reference-Scope of-.4 3ingle adventure-Tests for determining whether in the nature of business. The asses.see acquired shares in a newly floated sister concern and later sold a part of its stock at a profit. The Income-tax Officer assessed the profit to tax on the basis that i~ was profit accruing to the assessee from an adventure in the nature of business, and the order was confirmed by the Appellate AMistant Commissioner. On appeal the Appellate Tribunal held that tho U'an!action was in the nature of business adventure; that the assessee by itl Memorandum of Assoc:ation was authorised to buy anct sell shares; that there was a specific resolution to buy and sell shares; that the assessee included the profit on the sale of shares in _its profit and loss account without showina it in any reserve account, that the shares were purchased from borrowed fund! and not with ready cash; that the sales were not on account of any pressiq necessity; that it kept the profit in cash in a bank and that the assessee had in the past dealt with shares as a business transaction. On reference, the High Court held that there was no provision in the Memorandum of Association which authorised the carrying on of the businesa of purchasing and selling shares; that the inclusion of the profit in the profit -and loss account. was not conclusive of the question whether it was capital asiCt or revenue receipt; that the nature and character of the money !hould bo determined by its inherent character; that there was no evidence that the sharct were purchased out of borrowed funds; that a solitary transaction could not be taken as conclusive of the fact that the sale of shares was an adventure in the nature of trade and that in any case the dominant intention of the asseSiCO in acquiring the shares was to boost the shares of a sister concern and when •nee that was achieved the assessee started seiling the investments. On appeal to this Courl' it was contended by the respondent that the profit can be taxed only if the dominant int.ention of the assessee was to carry on an -adTenture in the nature of business and not otherwise. Allowing the appeal, HELD : The Tribunal found, after taking into account all the relevant circumstances, that the dominant intention of the assessee was to make profit by resale of the shares and not to make an investment. [134F] (1) (a) The finding that Joss or profit is a trading loss or profit is primarily a finding of fact though in reaching that finding the Tribunal h&s to apply tho correct test laid down by law. When the Tribunal bas considered the evidence on record and applied the correct test, there is no scope for any interference with the finding of the Tribunal. [134Gl C.I.T. v. Aslwka MarketinR Co. [1972] 83 I.T.R. 439. referred to. (b) The whole conclusion of the High Court was based on an unw3rranted aunmption of facts. The danger of falling to recognise that the jurisdictioa of the High Court in these matters is only advisory and that conclu~ion of fa.eta are conclusions on which the High C.ourt is to exercise the adviiorY juriadiction is illustrated by this case. At no time had the assessee a ca~ that t~ shares were purchased with a view to help a sister concern. Nowhere ia- the statement of the case or the supplementary statement of case nreoared by tho Tribunal and filed in the High· Court waa there a finding on tho questfon. [134E; DJ A (2) The tests for the purpose of ascertaining whether profits made upon a sale or an article are taxable profits are : (i) if a transaction (is in the as.sessee's ordinary line of bwineM it is in the nature of. trade. [131Jl......C] MARL AAA, ATTTT aqara waa Vaasa Bed face aces Carat fats(The Commissioner of Income-tax, Nagpur M/s. Sutle] Cotton Mills Supply Agency Ltd.)(25 wars, 1975) (ea eaTATfATs Vo Ao %, Alo Fo Fo Aw,Ato Mo FON AAT HieGro AAA HAT Heil) gfosay gram tae daz,1922 (1922 at 11)—-are 10(xv)—aetitaostftaatatetaeasiftaai—-faatfcatatHRA H ATA-AMASSS BH ATT FIT WaT HT FA ate fawa AT Ffare sre fear araT——aa & faa a ora ara trea oft& at gata sifa ag fate at aca a fates seat 2a &fara aT deraare areare-oteaa at sats ete atx ca fara aSTH ATHY TT HT ATA HT AHAF| faatredh weqah at arcat F ATATVGS H ATTA aT NIT FTea att fanaa % fag stasa feat car ats faatfzat + warfaazta faces aegheafer (atfam) arc fafats3, at fe faatfedt atasa ayaa 3, FS Bart WAfaagifeddA ate av aad FF6 Wat 2, 13, 150 wa ar ara HL Fa SrA1 aTHe AlasTara at wpa ar frat gq mrait ot fear fe ag ara va saa& sofafeat mat3 ot fe aizarxe al yafa are)gaat aK,faatfcal at acta ag at faag wa ist-atvara 2g aaife dazfafaarat Fate qt ade ay aie ga wuss nfsFaq Hhet ag amarat awatifeeq mat afamet + ag actaWeaAlST Fr AY| aTla HWA It, aeraH argad (ata) 7 sa ahaat feat att amant afer F orem at gfe at atatt ateew at, aia afew a ag fasegfrarat fe aafeaa deqagr< se—? HIATT Bl THs sre ate safsa ATA IT HLAMAL. AT BHATQt aa amar sea rarataa alfafacefaar qat,al vat vat aeafafaeifea fear fe dfs tax afat wer F fratfedt ar arara gaTearh ageara a, feat Jae TMS TI A, ayaa PAT Tay JaaTsamt seat a, gafae safsa ara qatat safe F A att gatHIT J Ga IT HC AST TATAT TT aHar| sat fara sh faes wraHrmga 1 seaam earaaa A edhe Hig Bl S| AMT AAT BW Fy, al vat vat ae afafratfer——farr set ot afewcr ay dia A faare weaTetar ate oft sea carataa ay fafasz fat mar at, ag fafa ate acaal fafa set at, wate Fe fe zor oeaTe Aa FH faat FM aTem at, ag uaea-atfea at ar astra-sfea | ag aa afafaheaa BAam scitera & fary fis aor faett aeg F fase at ae ara HUA ATH Z, TTsat el war glare ag ae — “aA ay seq TAT F TATA H fareafsa at 18 27” afe ag oat H Mat H fag aaa ay as Fagan faaa & at arat are Uaea-Bar F fears atar afar ate afefacea Yottarfer ar at, dt ag ara qoft-afaara® wT H card dat zatc afe fame areare H atera fHat arat & ar ae PeqaVNTe STAT HYsafe ar Tae a, a sat arearcara & wa H fearar sar ala|mast & Frater H eat 1x faare Her FH ag faegar et gfeae faara& fi wat argat fafaara ar earl ga acd HTT area 2, AIT fraaaa qt saa mivea A VS ataa fara, saa afer stra afasraHAT Beat 2, Fat afar Maa Var aia wal At 2......71 fe Ara-etmfae fratd ati feeg ae aia aaa wa Ageatfaa s fH afiryfaatS maa ar arifiada 8 afesrc|a afar ger ge sant a aet frets aae wet a go fear svat 2 ag fafaara ar ata area ar aectettadt & faeg tar art go fe sega: FTTATT B Baa A aT Vastariieara wz # fear wat ......3a ata aT ofearet atar afar Zfs ag ated ovazter 2 at fa dat adf Be ara A ww Tavagat aed 2 att gatH aTAa ae TAH aeah H agare faare Herarfer; at-set aaanfea feat ara 3, az we S—aaT va afaara HTat fe orca frat var 2, uf sfayfa at atta HTH Yer st ATAataafa & at ag tar afaarea§ at fe ate HATA & fan fart cataal eatfiad Hea HF arzare F gataH sret gargs (FU 8) qaiana & gaya zit arat ara Gat A Afaare 81 afe geraarxfratfzdl & arcane & ara aqme F 2, a ag afaraatfce wea A argat afeae vat gt anal fe ag carqiz at cafe ardfaq afaareagit seaeq ale 2, at fe meraarefagifedl B arate B aqaTHagt ziat ~@ Mle aa az ara seatw AAFR aval ake vastafefeafast a7 fads grat arfen fe aor ag geqagit emit at THAat 21 (zr 9) (ii) it is not necessary, to constitute trade, that there should be a !eriea of transactions, both of purchase and sale. A single transaction of purchaso and B -sale outside the asscssce's line of business may constitute an adventure in the nature of trade; [!31C-D] Venkataswami Naidu & Co. v. C.l.T. [1959] 35 I.T.R. 594, followed. I. R. v. Reinhold 34 T. C. 389, 392. referred to .. (iii) whore the purchase of any artide or of any capital investment is made without the intention to resell at a profit ihe resale under changed circumstan.c.et c would only be a realisation of capital and would not stamp a transaction with a buoiness character. [!31G] C.I.T. v. P. K. N. Co. Ltd. [1966] 60 I.T.R. 65 (S.C. l referred to. (iv) a transaction is not necessarily in the nature of trade because the pur-chau was made with the intention of resale. [131H] JenkinMJn v. Freeland 39 T.C. 636 (C.A.); Radha Debi Jalan v. C.l.T. [1951] D 20 I.T.R. 176; India Nut Co. Ltd. v. C.l.T. [1960] 39 I. T. R. 234; Sooniram Poddar v. C.I.T. [1939] !.T.R. 470. 478-9; Ajax Products Ltd. v. C.I.T. I.T.R. 297, 310; Giistad Irani v. C.I.T. [1957) 31 I.T.R. 92 and Mrs. Alexanden v. C.I.T. 119521 22 I.T.R. 379. 402. referred to. (v) a capital investment and resaJe do not lose their capital nature merely because the resale was foreseen and contemplated when the investment was made and the possibility of enhanc;ed value motivated the investment [132BJ Leeming v. Jon.., 15 T. C. 333; Saroj Kumar Mawmdar v. C./.T. [1959.1 37 I.T.R. 2-42, 250-1; I. R. v. Fraser 24 T. C. 498, 502; JanJdram Bhadur Rmn v. C.l.T. [1965] 57 I.T.R. 21, re!trred to. (vi) the accretion to capital does not become income merely because the original capital was invc,,ted in the hope and expectation that it would riso in value. (132.D-E] Leeming v. Jones 15 T.C. 333, referred to. (vii) The intention to resell would, in conjunction with the conduct of the Msenee and other circumstances, point to the business character of the tl'lln>llction. [132F-G] In the instant cue, the ·BBsessee had been dealin& in shares. (i) In a.a earlier assessment year the assessce had shown in its profit and loss account and the balance sheet a loss in dealing of shares which showed that the .-G had been baying and !elling !hare! even though as an isolated adventure in tile nature of bwineu. The debit on account of devaluation of sha.rc1 shown ia the profit and loss account wa! permissible only on the footing that the sh.area cOll!titnted the Btock-in~trade of the asse~e, (ii) in view of the resolution of th.e ~essee authorising the director to purchase and sell shares the view of the Hilb Court that the memorandum of association did not authorise tho company to acqn.ire and sell shares had no· relevance: <iii) the findin2 that the sharoo were purchased with borrowed funds on which the a•e•tce was paying intere1t.. wu a finding 111uoported by eviden:.e. The Tribunal wa1 correct in holdin1: that H tho .... ...., had not invested its funds with a view to earn dividend: (iv) the TribUJl&l found that the sh.,.. were not sold to liquidate the debts of the aiseiiOe as the bll.lance sheet showed that the proceeds were kept as cub in bank. [1976] 1 S.C.R. 128 SUPREME COURT REPORTS CIVIL APPELLAOE JURISDICTION : Civil Appeal No. 1877 of 1970. From the judgment and order dated the 10th January, 196& of the Madhya Pradesh High Court at Jabalpur in Misc. Civil Case No. 221 of 1962. V. S. Desai, B. B. Ahuja and S. P. Nayar, for .the appellant. M. C. Chag/a, B. Sen, A. K. Chita/e, A. K. Verma, Ravinder Narain. J.B. Dadachanji and 0. C. Mathur, for respondent. The Judgment of the Court was delivered by feat fearaart ateararm araa & faa ag arasrs aat 2 faaa & att fama gaia aai cart & uevaerti at faafaat aaa Tatafer1 fraiftdt & areare F aqme BH aret HT ate fama ar atsmaa aetgzate sag al cafesr staygi aaa gs7 alan ztTHT H HAA BTareare feat qa Mea A es AMAT HAtear feat eeqaer= At emigit at safe ar Maa aaa & far masQt afe gepaart at-aIT aT aTTIATR fae ae wea & at faifedtATA HIATT AAT Nl Flat J Ale Ag 924 fe sar Hrs feta F arsal sata ar stare go gt adt aaari feet deqaart Hi CHa AATAZITAAT ai HAT| A AMET Teaaae aga aga A feat ar aat zhqet-fama ait eax at vafe aa tag &ala ag gta 2 feFadl seragiz wt taeq vaara feet qa fron,fagira at wallal aly awh Taafta aati feat at saat, afew saat cae feat aayaat aay a aiefeafaat oz gaarfeafeatstarafew.aaa:aad HAA IT A} zat sury sat #, sat a az fafRaa car ztfr arr arg fafstce deqaare earare at wHfe wre aT agit(Fer 10az 11)wai feat aeq ar ai feet cait-fafaara ar, vetecard Aad Fr,eT ay at galana 4 aia % fear fear ara2,aatofeafacqfefeafaat & ata fear war gataaa dat er arse ata gat wiz eaTrg TX PITA -F LAST HY YT agaT ged1 ag grasTet 3 fe als Gataare earatz at yafssrsafaw8 adifeaagifaaa & gina & fear wat ar(4% 12 a 13) qat-fafraia ax gafaer at gsil-cafa Faq sa HiTAACATal at sat aaife gafana % at FH gaigaia ae aqeaa sa ana et fear qa at wa fin fafeara featwatar ate fafa aferaReat ar araraar & shea art (Gu 14) Gaanr HUA BI TET aT MATABINTgameatesAIKfafeta grater gear ate 2, faeg ageat ga art ar fararaaaga vet stat fe alg Mera corare at gaf ard1gafear weoraa & Fretted & ara ate oer FH geal & devage H arcaneFanaa ecaeq ar aha faaatzg1 (Fer 16 ate 17) gery & ort am fratfedt at camaa ae at fe Fat fafaara& aT ge as ae T whe fans orawnar F HeyFeAlTST AT,anf waare ven & sfadara & fare cara sta tat ferg whee+ ag oat fe aad ar fama faatedt &acl a aaa wz atgfee & agt fran war or aaife fawn oan vadFee H dH HWeu 71 feat tt aaa fraifedt ar aecaaeatadtar fe ardermafazat-afeare ara faafaa agar aecdtata@araarwetat gfe & fearvat. artfaatheataraat staataaa ae at et aeran argaa (atta)F ayer tar qawIAa aT;alt a a atta fant & aaer a sa ae ate fear wat ari aaaa aaa Far ofa ger aare faa a agl seq eqearag F orgafaq ag aaa % aagem Haq HeaHaagF weft fasasutae sat art gee eararagr ar argy fasndgaazat atagfadSTATAT Te wrarfea 8, tt fe Gea eaTaTaT F aver fraffedtaterat 7g acital #8 frat ae ati sa ara A fe st ara a THarataa at afgafrar haa aareara 2%, wie ag fe aealFB farsayva frong g fers great qt seq eararag st HarzaretafaarfearHT TAT HAT lay B, TA AaAe A Gt GAT gs AS ST As A esseztmar&1 (Fea 21 ate 23) afanta a, ait gana afefeafaat oefaar<e wea F oeaaag fasrd famar fa fratfcat ar ger aaa aati at qafawa alaara warat at a fs fafeata wear aefasaefagifaar arasaTat axel alfa ar ara 3, qera: aeqdaatfasne@, vaft agfasag faaraa 4, farce at fafs are afasfad agt watey agaunt Pat 21 aaar ae saa = fe afaaca 3 afrra weFH aay 982seam eataray fata afar =:[1975] 4 aHo fto qo :[1940042]24WTgo do Wo Hho TAM 498: WAT.||to(LR, Vs, Fraser);14 [1939]7 so ato ato 470:|Had Gare NET AAT TART ATT(M/s. Sooniram Poddar Vs, The Com-missioner of Income-tax);ax13[1928-31]15.dto ato 333;(Leemingcia aay Vs,rT Jones).C|14 fafa ate afrerftat:«61970 at fafaa acta de 1877.1962 4 saat fafaa staat aear 221 WHET TAT Beyaaa Fade. 10 waar,1968ae fats wiz maa % fees astra Bat at aE ae Bat at aE ae at aE ae aE ae aeSO fate astra Bat at aE ae Bat at aE ae at aE ae aE ae ae aaa Bl WT Awast ato ute Bars, dto ato agaATT Tae Tho aay| Teaat BY WT a aaait Uo Ato OMA, ale Aq, wo Rofaaa,attadtuoFo.ant,adaittare att, Fo dtoararaisht gtxAto Aoa ATYT:- —baTaTaT aT faupr eararferalea Ho Fo Aeq A fear| —-amanfirefa deg— MATHEW, J.-This is an appeal from the judgment of the High Court of Madhya Pradesh in a reference made at the instance of the assessee M/s. Sutlej Cotton Mills Supply Agency Ltd. (hereinafter re-ferred to as the 'assessee') by the Income Tax Appellate Tribunal (hereinaf,er referred to as the 'Tribunal') under s. 66(1) of the Indian Income Tax Act. The question referred was : "Whether the inferencg of the Tribunal that the profit of Rs. 2,13,150/- arising from the sale of 1,58,200 shares of the Gwalior Rayon Silk Manufactunng \ Weavmg) Co. Ltd., is assessable as business profit is correct ?". When the reference came up for hearing before the High Court, the High Court found that although the Tribunal was of the view that the question referred was a mixed question of Jaw and fact, it had not stated all the facts and circumstances on which it based its conclusion that the profit of Rs. 2,13,1501- was a business profit and so the Court called for a supplementary statement of the case and a supplementary statement of the case was submitted to the Court by the Tribunal. The material facts in the statement of the case were as follqws. The assessee is a public limited company and it JS controlled by the Birlas. The assessee applied for certain shares of the Gwalior Rayon Silk Manu-facturing (Weaving) Company Limited (hereinafter referred to as the "Rayon Company"), also a company controlled by the Birlas. This company was floated on 25-8-1947 with a paid up capital of Rs. 5 lakhs made up of 50,000 ordinary shares of Rs. 10 /- each. In the year ending 31-12-1951, the Rayon Company issued certain new shares tor paid up capital of Rs. 1,17,25,000/- made up as follows: The assessee which was interested in the Rayon Company and which bad already purchased l,OOQ. ordinary shares, subscnbed for 3,49,000 shares of the new issue and paid Rs. 8,72,500/ as application money on the 25th and 27th February, 1951, and paid Rs. 26,17,500/- as final call money on 10-8-1951. These purchases were authorized by a resolution of the assessee dated 7-2-1951. The assessee sold a part of its stock viz., 1,58,200 shares at a profit of Rs. 2,13,150/-. B For the assessment year 1956-57 (accounting year ending on 31-3-1956), the Income Tax Officer sought to assess the amount on the basis that it was profit accruing to the assessee from an adventure in the nature of business. The assessee contended that the amount re-presented capital gain as the shares were purchased by way of invest-ment and that the same cannot be taxed as revenue receipt. The Income Tax Officer rejected the contention. 'fhe assessee· tiled · art c appeal before the Appellate Assistant Commissioner. He confirmed. the order. The assessee then went up in appeal before the • .Appellate Trlbunal. · • ,. - ਰੁ. 37,50,000 me wilt && fade #, fad fretted dad ages area faseacare wardt fafats,(fae gue gah ger ‘faratfedt’? & wg F| fafese fear var 2) st ortar qe araax atta afracm (faa gazRah Teg ofracy’ } eg F fafese Pear mar’)sfosaa garyame Yaz St qe 66(1). & wets fear QT, HET TaN yey yaTaT ® sinat winda Jo Aame Hien fret ans GAT [rato Hea] 983 fruia & fase orgs TY agss Mt weafafecefeatvar at agTe ai|| “aor afanzatagfrend fe vaifaae aa facsaeqgrater (alfa) seat fafats % 1,58,200 tae * fawa& att are 2,131,150 avd a art aitarcara F wy F fraig@, wel ge?” '2,wa ag fate sea aratay % ane gaag F faa ta fear.Tat aa Tea araraTs A ag war fH safe afew ar aa ae at fefafase sea fafa itt aeqat fafaa seq 8, carf cat a ait aemic ofzfeafaat afaa aah a)at fare grarcat saat ae frondfaatar at fe 2,13,150 we BT ara Hrearweara gl ate sal Hrzaya eqqareay F a art H aqgem faaenaAaag X aie aferTa AAA Hr TAGTH faator eqtareara F aaa TeGa Peat ary 3,ame & faacu FH arkan ger ga sare a4faatfcdt ategfedifad erqcat & ate ag favar-aftare & faaeqoreta 21faaffedta iaqifaarz toa fees aeqharafer (atfav) aweqdl fafets (fad catgan qeare “tra egy” H wT A fafese feat war g) % sar fazareqfeart gta faafeaa aroal & HHS NaU F fae saca farat arae seqat aa-ae wad % 50,000 arqet fad X wea 5 ara eat atqaTaa Tt F aly 25-8-1947 at arg Ht TE att31-12-1951al vara gy ara ag H toa geod) J 1,17,25,000 wad at ameadqat % fae afore ae tar Guaa faq Ft ea WHIT F:-— quaar aaa <a-zaeat ¥7,60,00076,00,000maa aT2 eam, 8sar sfeFaxatata aalad za-aT wtFH .1,50,000 arget3,75,000FIT125 eae of Fat at ae B ame at-ataqy F 6% BY art F 1,50,000 afaara tae (atUe ag Hl Gaar spr fafaface ardke F are Herat.H fawer qt aq Aer at sfaea ali)|37,50,000 4,fratfed & at fe tar weqdt F feate at ate freA1,000 arget agar ganat ate face, qdga aq aa aa3,49,000 aati ¥ faa afaera fear arsit< 25aar 27 grad,1951 @ gaat at wag He wT FH 8,72,500sat aaa fargiz10-8-1951 at afeqa-att tHeHF BIH 26,17,500 at aaafaq|wa arte 7-2-1951 are fralfcat & aneq ater wifagafag ae &1 faetfedt F 2,13,150 eat ar ara eat, AIT eer aTUH MTT HAT 1,58,200 ar aa far||| 5.fastaat 1956-57(31-3-1956at aaa aaala war ag)F far mane afaard Fea qrare qe caA aTRate pw at alfa al fe ag tar ara or ay fa faaifeal atHItaIe Ht THA H fee ag Mara yays gar arsfreatfedt a agaataay fe ag waa qal-ara ot aaife aa, fafaart & atx 9,eure me F aie ag fe va oe Uses ota Bw HR He agt aaaWT THAT LATAKT Afaaret F ga aata Ht wedtwa we feats fratfadtFT aglay aygaa (at) Fara aA Bet a1 TAI wea atgfe et 1 sae arefagifedt + ada gleawr F aaa adeTET ATI. 6.ofan } adtofeftefaatoefase wet} ae)ag fasae frarat fe ag aeragrt areartstan(faata-csteqz)|at spfa ar arate ag fe ga oral oe st ama aT aear a faeate & afar ag fasag fares % fag gesfta gata, FAAfaatfcdt ay Fat atlat wie aaah far sah aan-aga F aw 3% qe12,13, 28 watz 29 arer stfaaa fear war ar; ara} & a fafafase aad & frat are fraticdt a faeaaat et aad ayatiaaait aad & far sifasa fear var gr; faaifeat & ara Aixalfa-yatHY2,13,150eatstara,feet aitem-aear & faafaaarfarefl mer sitarfore vt Pafafae er & aa fing far,= #soarfaet fear ar; faatfedt 4 gare at af fafaay Ha, a fe va aaa Ht fa ga apart & yrarer or, tat ade a; faaifedt 4 faaaraatfaeal at qfa awa at afe & Prat softer mracawar F arefama aét faa a, afer qleaa FH fawa-airy aT Ue ATT qalgeE The Tribunal came to . the conclusion, after considerl~g all 'the circumstances, that .the transaction was in the nature of a business .l\d-venture and that profits were liable to be taxed. The reasons ;vhich induced the Tribunal to come to this conclusion were : The assessee was. authorised by clauses 12, 13, 28 and 29 of paragraph 3 of .its Memorandum of Association to buy and sell shares; there were specific resolutions of the Company authorising a director of the assessee to purchase and sell these shares; th~ assessee had included the profit of Rs. 2,13,1501- in the profit and loss account without taking it to .any reserve account or specifically set it apart for any other purpose; the assessee had purchased the shares from borrowed funds and not with money readily available to it; the assessee did not make the sales. on account of any pressing necessity to meet existing liabilities but had .in fact kept a part of the sale-proceeds as liquid cash in the United Com-mercial Bank Ltd.; the assessee had, in the' past, dealt in shares as busi, ness transaction and had claimed for the assessment year 1951-,52 Rs. 1,29,214/- as loss on account of its dealing in shares of M/s. Titagarh Paper Mills Ltd.; it also claimed Rs. 6,30,000/- as loss on ·account of devaluation of the shares of M/s. Pilani Investment Corpo-ration though that was not allowed; there had recently grown a busi-ness practice of investing large sums of money in shares in new ventures with an eye on their appreciation for obtaining by sale substantial pro-fits in future. · G The High Court, in its judgment, said that there was no provision in clauses 10, 12, 13, 28 and 29 of paragraph 3 of Memorandum of Association of the assessee which authorised the carrying on of the busi-ness of purchasing and selling shares, although some of these clauses did authorise the assessee to acquire and sell shares in other similar companies; that the inclusion of the profit of Rs. 2,13,150/- in the profit and. loss account without taking it into any reserve specifically H was not conclusive of the question whether it was a capital asset or a revenue receipt; that the· true nature and character of the moneys receiv-ed was to be determined not by the manner in which the assessee treat-ed it but by its inherent character, and, that it was wholly immaterial 10-714 Sup. Cl/75 SUPREM~ COURT REPORTS wafgaa ae fafats % andy Feo A sar we fear ar; frathet aTa ane H arrare-aeqagie & BIH Hae FH ara F sare featat Mit wax1951-52 are faatea-ay % faw aaa ciety Ftface tafate & rey ar ray HaBH rT gs aif F ET F1,29,214 wax ar arar fear at; sat aaa frardt gaaeetie areTtee dad & wagers ¥ wreq Zé af F ea F 6,30,000 ag m1arat frar at, vate oe edtare vet fear aa at: area a Fas MeatB Fad Haat stage ast ufa aay a areartsar ga afer a aAagi 2 fad fa ga ang aafe sar yer ag ag,afast A featHa ater ara atures fart str ah| 7yea arate 9 aoa facta & ag aa ores feat fe frattet& daa-aga FH Gur 3 -® @es 10, 12, 13, 28 we 29HF dar wyft gras aah & ot at Hwa ate fast FH arate at Tara Ffae nftsa wear a, rafe ga quel ¥ 8 gw andl H faa at ataa aia & fae orfasa fear war 2 fe ag cat sare at wea HeafaTy¥ Fat alsa Be ada mie vost fara wt aha5 a Fe 2,13,150aay & araat,fafafase wa 8 fad) are (mar) F fag faaara att arta Sart afer wrar gt wea ar fafavaran adi 2 fHar ag daft-arfea at ar usea-oiftr; ag fa req aa at arate-safe ate caeq al ga Of a wafer adhfear ara at faaafagifedt 3 va saatfea fearat, afew saw aeafafed caeq attgagifea feat arat at atvas fe ag art qua: aatfean & fafauifedy2soma wan sy frasarea ararat; AKng fe gaaay H are wt area algeagt 2 fa Bar gat ataf fafaal¥ Badeae aaalfefaaifed? Fwa garezeaufamaaafafate#31,75,000ertar araaafratqt att de ® aq art F 876,008 eax 2 art O ag ar fatagy, asa rmarag a ag wa ar fH afraem ar ag frond fis 1955% Fact ar fase faaara arfreal BY ghar Ber sh afee & fet aafearagiaaraal & arco aay fear war ar, afaatn s awa sega areal Izaratfea at) Pag array a ag wa eaaa fear— ‘ag st anat g fHwa aaa faatfadl-neadt & arfaea farars2a, faeq ae Beat facHar& cad ara gfe sa arfacat at gfe Het aT afer A VA va TAT 986 9 sean rarer fara ofaet =:[1975] 4 sao to Go at far wet & fore wage Par astari”? seq araray Ht ae aftma at fa afta & ca frome at fe faatfedl & dad dere aqzPaow fafats & aadcarat & wrea sé arf B wT F 1951-52area frafeo-ag & fre 1,29,214 eat at arat fear ar ale ae feaaat ufgart & sak are sy edtere ae fear at, ad ArarWaT afer fReq ser aaTaT a ae ua oraa feat fH za wHAtaFeraRIT BT Be TET ar PVqTR ag’ Arar aT aaat fr seaTa BATar faery eqtare at sala at aaa ari az ger area, fart eqararaa al ag afafratica wea & fare fea fear an fe ag deraeizeaTaTe HY Tala aT sae aah a, ce at fe aad a aise wt Fzfaraifeat ar ger area agattt aged F qatq war Brqal H TATae Her al asa ar ate ga gHTT a Ta geafasita aAeaTsT FH BT Acarfaa wet & far vast wear szat arate ca ag ara TAATe at fratfedl & fatrara at, faah yea at ca dq afwats at gaat, @aar areea wt feat| 8.faa sea at ofan a atte F fears wzar ast at wheat Sea eararaa at fafase fear qatar, ae fafa ate ae ar fafaamet aT, Bate we fe gar sean act F fans S ST ara gat aT, azusea-sifte ar isitnanfta1 ¢At-afaate aan are ate ai aha@ Ta araifacha Usag are wy TATA MTSAaeE ata Heat fafazetare wine H eqee Fear ar sat gi fagrq carat J ae wa saefear fe ag ara ofafafera aut & sata % fau fe eat feat aaa %fame It BC ara HUaT ara z, Ft set Gert sar slat 3, ag az a—aal az aeg eatatt F sata F fae asa Hh we s 2” ale ag arnz& cataa & fe afta at 7e 2%, at sae fase a DA atar ara waea-eet # faarat sat arfar atx afs faaa qsfi-rnfer ar A at agmT Teail-afrar F wrFH gard slay g ate ate faa areare Fatua fear qa g aT ag aeraNit earaTe at safes Br sam st at gaareata H WT HT fearar arar area a gait faawy vi< Va faa% ala fara fe ata dt 2, wl aac 2, ga aesafer aare a eetelfraa siete faodtee aara afte! are aaa Hosa wacahqa &, ft aa aga sfafesatata g— as to how the assessee treated the amount iu question; and that there was no evidence that the shares were purchased out of borrowed funds as the assesoee had a fixed deposit of Rs. 31, 75,0001- in the United Commercial Bank Ltd. and a deposit of Rs. 8,76,008-2-0 in the current accomll of the Bank. The High Court was of the view that the find-