- (1.) This is an appeal on a certificate granted by the High Court of Judicature at Bombay under sub-s. (2) of S. 66A, Income- tax Act (hereinafter referred to as the Act.). The appellant is the Commissioner of Income-Tax, Bombay, and the respondent is the Provident Investment Co. Ltd., Bombay, hereinafter referred to as the assessee company.
(2.) The short question which falls for consideration in this appeal is whether a particular transaction, details whereof we shall presently state, entered into by the assessee company in 1946 resulted in capital gains within the meaning of S. 12-B of the Act. The question which was referred to the High Court under S. 66 (1) of the Act was this: 'Whether the assessee company made a capital gain amounting to Rs. 81,81,900 within the meaning of S. 12.B, Income-tax Act' The High Court answered the question in the negative. The appellant being dissatisfied with the judgment and order of the High Court asked for and obtained a certificate from the said High Court that the case is a fit one for appeal to the Supreme Court.
(3.) The material facts may be very shortly stated. The assessee company is a private limited company, the shares of which were held by the then Maharaja Scindia of Gwalior and his nominees. At the material time, the assessee company was the managing agent of Madhowji Dharamsi Manufacturing Co. Ltd., hereinafter, briefly referred to as the Dhhaarasi- Copany, and Sir Shapurji Broacha Mills Ltd., briefly referred to as the Shapurji Broacha Company. The assessee company held all the 'conversion' shares of the Dharamsi Company and a substantial majority of the 'conversion' shares of the Shapurji Broacha Company. The Dalmia Investment Company Limited, which will hereinafter be briefly referred to as the Dalmia Company, wrote two letters to the assessee company on 14th September 1946. In these two letters, the Dalmia Company offered to purchase 28,328 'conversion' shares of the Dharamsi Company at Rs.500 per share together with the managing agency, and also 75,212 'conversion' shares of the Shapurji Broacha Company, together with the managing agency. We are not concerned with the other details mentioned in the two letters, except this that the Dalmia Company made it clear that it would purchase both the mills or neither and a time limit till 23rd September 1946, 3 P.M. was imposed during which the offer would remain open. This time limit was, however, extended later up to 30th September 1946. The letter further stated: "On your accepting the offer, we will pay to you Rs. 20 lakhs in the case of the Dharamsi Company, Rs. 30 lakhs in the case of the Shapurji Broacha Company as and by way of earnest money. You shall have to arrange to get the transfer of the managing agency sanctioned by the general body of the shareholders within a period of 40 days from the date of acceptance. As soon as the transfer is sanctioned, we pill pay the balance of the purchase price.";