B.L.GUPTA, J. - (1.) THIS is a reference under section 66(1) of the Income-tax Act. The question which has been referred for the opinion of the court i : Whether on the facts and in circumstances of this case the surplus realisation of Rs. 7,750 by the sale of 1,125 shares of the Soora Jute Mills Co. Ltd. was revenue income of the assessee liable to tax under the Indian Income-tax Act?
(2.) THE facts giving rise to the reference ar : that in the assessment year, 1946-47, the assessee was assessed in the status of an individual. In that assessment a sum of Rs. 7,750 was included as the assessees share of the surplus realisation by the sale of 9,000 shares of the Soora Jute Mills Co. Ltd., which stood in the name of the Lala Shyamsunder Ji and out of which the assessee held 1,125 shares. It may be stated that 36,000 shares of Soora Jute Mills Co. Ltd., were purchased on April 20,1944, at the rate of Rs. 32 per share from Messrs. Mangani Ram Bangar & Co. of Calcutta as follow : JUDGEMENT_991_ITR52_1964Html1.htm On February 1, 1945, Lala Shyamsunder Ji purchased 250 shares from Lala Ramratan Ji at the rate of Rs. 32 per share. Thus, the total holding of shares in the name of Lala Shyamsunder Ji came to be 9,000 shares. Lala Ramkishan Ji, the assessee, was a partner in the firm of Messrs. Ramkishan Baldeo Prasad and the 9,000 shares which stood in the name of Shyamsunder Ji were held by the partners of the firm as follow : JUDGEMENT_991_ITR52_1964Html2.htm All the 36,000 share purchased on April 20, 1944, were sold to Messrs. Mangani Ram Bangar & Co. at the rate of Rs. 40-12-0 per share in April 1945, that is, after nearly one year of their purchase, at profit of Rs. 8-12-0 per share. THE assessees net profit on the sale of 1,125 shares owned by him came to Rs. 7,750. During the assessment proceedings the question arose about the liability of Rs. 7,750 to tax. THE case of the assessee was that he was not a dealer in shares and the shares had been purchased merely for acquiring the managing agency of Soora Jute Mills Co. Ltd., and is the managing agency could not be secured, the shares were sold, and the surplus on sale was an accretion of a capital nature and was not a revenue receipt. His case was not accepted by the Income-tax authorities and by the Income-tax Appellate Tribunal. All of them held that the surplus was income liable to tax. The findings recorded by the income-tax authorities were that the shares held by the assessee represented his stock-in-trade and the surplus realisation by sale of the stock-in-trade was a revenue receipt liable to tax. In arriving at this conclusion the income-tax authorities relied upon the assessment proceedings for the preceding year in which the income from dealing in shares had been included in the total computation of the assessees income. Against the findings recorded by the income-tax èauthorities the assessee went up in appeal before the Income-tax Appellate Tribunal and contended before it that he had purchased the shares merely for the purpose of investment of the shares did not represent his stock-in-trade. The Tribunal held that the assessee was a dealer in shares and had entered into profit-making scheme, the object of which was the managing agency of the Jute Mills, and further the shares of the Soora Jute Mills Co. Ltd. were purchased and sold at profit because the market had gone up. In the result the Tribunal held that the amount of Rs. 7,750 was rightly subjected to tax. It may be stated that the Tribunal had not recorded its findings in its appellate order in precisely the same terms in which it recorded it in the statement of the case, and which have been quoted above. In the Appellate order of Judicial Member recorded as his findings as follow : The facts on record clearly show that the assessee and the other persons associated with him entered into profit-making scheme and the object being to acquire the managing agency of the Soora Jute Mills Co. Ltd. In furtherance of this profit-making scheme the shares of the Soora Jute Mills Co. Ltd. were purchased and were ultimately sold at some profit because the market had gone up. In the preceding year the assessee had income from shares of the Hindustan Commercial Bank. The profit of Rs. 1,687 for the preceding year was shown in the return itself by the assessee. It cannot, therefore, be disputed that the assessee was dealing in shares. The assessees conduct in the preceding year and his conduct in purchasing shares for the purpose of acquiring a managing agency show that the ultimate object was to make profit. This was a profit making scheme and the realisation made by the assessee must be held to be revenue receipt.
(3.) THE Accountant Member, who concurred with the opinion of the Judicial Member as quoted above, observed as follow : I agree. The assessee admitted before the Income-tax authorities that the sole purpose of the purchase of shares in Soora Jute Mills Co. Ltd. was to obtain the managing agency of that company. He further admitted that having failed to obtained this managing agency he resold the shares. The assessee, therefore, joined in the a common venture with some other persons to obtain some business agency. In my opinion therefore the purchase and sale of the shares were part of the business venture and any surplus arising out of the sale was a profit out of the business venture and, therefore, liable to tax. On the basis of the above findings the learned counsel for the assessee, relying strongly on the decision of the Supreme Court in Ram Narain Sons (P.) Ltd. v. Commissioner of Income-tax, urged that on the findings that the shares had been purchased for the acquisition of the managing agency and had been sold because the managing agency could not be obtained, even though the sale was at some profit, it did not result in income liable to tax and the Tribunal was in error in holding otherwise. There can be no doubt that on the finding of the Tribunal this must be the result and it would not matter that in the preceding year the assessee was dealer in shares or that he had made some profit on the sale in question. Sri R.L. Gulati, learned counsel for the Income-tax èdepartment, has, however, argued that the finding recorded by the Tribunal that the shares had been acquired for the acquisition of the managing agency was without any basis, and indeed in disregard of the materials on the record. He urged that in recording the finding in its appellate order the Tribunal purported to rely on the facts on the record. According to Sri Gulati there were no facts on the record to show that the purpose of the purchase of shares were the acquisition of the managing agency. He further argued that where there is either no material in support of a finding or the finding is perverse and not rationally possible, or if the finding is inconsistent with the evidence or contradictory of it, the finding of fact is to be deemed to be erroneous in point of law, and such a findings is not conclusive and binding upon the High Court. He went on to urge that in such a situation it is open to the High Court to go behind the finding and to look into the facts itself and draw its own conclusion. In support of his submission Sri Gulati relied on the decision of the Supreme Court in Sree Meenakshi Mills Ltd. v. Commissioner of Income-tax, Liquidators of Pursa Ltd. v. Commissioner of Income-tax and the decision of the Calcutta High Court in Bhikamchand Bagri v. Commissioner of Income-tax in which relying on the said decisions of the Supreme Court and on certain other decisions of the same court and of the House of Lord, the Calcutta High Court went behind the finding recorded by the Income-tax Appellate Tribunal, and examined the evidence for itself and recorded its own findings. ;