T.P. Mukerjee, J. - (1.) THIS is a reference made by the Appellate Tribunal under Section 66(1) of the Indian Income-tax Act, 1922, hereinafter referred to as "the Act". The statement of the case relates to the assessment year 1959-60, the corresponding previous year being the period from the 1st May, 1957, to the 30th April, 1958.
(2.) THE assessee, who is the applicant in this case, is a private limited company. It acquired 10,000 shares of Messrs. Ranapur Commercial Corporation Ltd., hereinafter referred to as " the managed-company " in the year 1945, for the value of Rs. 5 each. In the same year the assessee-company acquired the managing agency of the managed-company. On the 20th of January, 1958, the assessee-company applied for transfer of the entire lot of 10,000 shares to Messrs. Oriental Engineering and Commercial Corporation, Calcutta, and eventually transferred the entire lot of shares on the 7th March, 1958. THE sale was made at the rate of Rs. 4.25 per share to the said Messrs. Oriental Engineering and Commercial Corporation, Calcutta. $ Shortly after the said transfer on April 18, 1953, the managed-company became amalgamated with the assessee-company. In the balance-sheet of the assessee-company as on April 30, 1958, the 10,000 shares of the managed-company were shown as investments. Consequent on the sale of the 10,000 shares to Messrs. Oriental Engineering and Commercial Corporation, Calcutta, on March 7, 1958, the assessee-company suffered a loss of Rs. 7,500. The assessee-company claimed deduction in respect of this loss in its assessment for the relevant assessment year 1959-60. The assessee contended that this was a revenue loss and was, therefore, deductible in the computation of its total business profits. The Income-tax Officer rejected the claim of the assessee and held that the loss was in the nature of a capital loss. When the case went to the Appellate Assistant Commissioner in appeal, he took a different view. The Appellate Assistant Commissioner found that the memorandum of association of the assessee-company authorised it to deal in shares. The Appellate Assistant Commissioner also found that the assessee-company had sold all the shares on the 31st of March, 1957, and again purchased shares of other companies on the 15th of April, 1957. He also referred to the fact that the Income-tax Officer himself had treated the assessee-company as a dealer in shares in the assessment for the year 1961-62. On these considerations the Appellate Assistant Commissioner was of the view that dealings in shares formed part of the assessee's regular business and, therefore, the loss in question was a revenue loss. The Appellate Assistant Commissioner, therefore, allowed the sum of Rs. 7,500 as an admissible deduction.
(3.) AGAINST the order of the Appellate Assistant Commissioner an appeal was preferred by the Income-tax Officer before the Appellate Tribunal. The Appellate Tribunal found that the crucial question for determination was whether the assessee was a dealer in shares. The Tribunal found that quite a lot of shares were acquired by the assessee during the accounting years from 1945-46 to 1958-59 and it was only in the relevant year of account that the first sale of any shares took place. The Tribunal also noted the fact that simultaneously with the sale of the shares in question the assessee-company acquired the managing agency of the managed-company and it also found that the transfer of the shares, which was made on the 7th of March, 1958, took place shortly before the amalgamation of the assessee-company with the managed-company. Further, the Tribunal referred to the fact that the assessee-company had itself shown the acquisition of the shares as investments in its balance-sheet and not as its stock-in-trade. On these facts the Tribunal came to the conclusion that the loss sustained by the assessee on sale of the shares was in the nature of a capital loss not allowably as a deduction from the business profits. The Tribunal, therefore, rejected the claim of the assessee on this point, and hence, this reference. The question which the Tribunal has referred to this court at the instance of the assessee-company is as follows : " Whether, on the facts and in the circumstances of the case, ike finding that the amount of Rs. 7,500 is a capital loss is in law justified ?" ;