- (1.) THE Court: The subject matter of challenge in this appeal is a judgment and order dated 31st January, 2003 passed by the learned Income Tax Appellate Tribunal pertaining to the assessment year 1996 -1997. The assessee has come up in appeal. At the time when the appeal was admitted the following questions were formulated. " 1) Whether on the facts and circumstances of the case the Tribunal was justified in holding that for the purpose of business of advancing money and cash was capital asset and not stock -intrade of the said business? 2) Whether on the facts and circumstances of the case the finding of the Tribunal that the assesse was not engaged in the business of advancing loans and that money and cash was not its stock -in -trade was perverse and contrary to materials on record and based on irrelevant materials and considerations? 3) If the Question No.2 is answered in the affirmative, whether on the facts and in the circumstances of the case the Tribunal was justified in holding that the expense incurred by the assessee in procuring cash by way of issue of share capital was not deductible business and revenue expenditure? 4)If the Question No.2 is answered in the affirmative, but the Question No.3 is answered in the negative, whether on the facts and in the circumstances of the case the finding of the Tribunal that the cash procured by issue of share capital could not be held to be conversion of Capital into stock -in -trade was justified in law and not perverse -
(2.) MR . Murarka, learned advocate, appearing in support of the appeal submitted that the question nos. 3 and 4 as the questions themselves would suggest are dependent upon a favourable answer to question no.2. Therefore, the question no.2, according to him, is the most important question, which this Court has to decide. The question no.2, according to Mr. Murarka, is relatable to the following finding recorded by the learned Tribunal. " A perusal of the balance sheet for the year ended March, 1996 also reveals that the assessee had investment in fixed assets, stock in shares, stock on hire, loans and advances. It is further observed from the annual report for the year 1993 -94 that the subsidiary company of the assessee, namely, UCL Housing Ltd. had taken necessary action for finalisation of plans of both residential apartments projects, the Queens Park Building for higher income group and the Thakurpukur project at Joka crossing for lower and middle income groups. The report projected confidence that the company would make reasonably good profits in the aforesaid building projects."
(3.) IN the light of these facts on record, the contention advanced on behalf of the assessee that it is mainly engaged in the business of advancing loans and the cash generated by way of enhancement of share capital is its stock -in -trade does not deserve serious consideration. Mr.Murarka contended that the learned Tribunal appears to have been influenced by the fact that the subsidiary of the assessee was engaged in the business of real estate. He submitted that the assessee is a separate entity and the assessee can have no connection in law with the subsidiary. He may be right in law in saying that a subsidiary is a separate entity.;