- (1.) DIPAK KUMAR SEN J.: The material facts in and the proceedings leading up to this reference are, inter alia, that M/s Atul Kumar Deovrat and Co., the assessee, is a firm constituted under a deed of partnership dated October 29, 1964. The two main partners of the assessee are Ram Saran Kejriwal and Shyam Saran Gupta, who represent their respective HUF in the said firm. Several minor children of the said two partners have been admitted to the benefits of the partnership in the assessee-firm.
(2.) THE assessee carries on business, inter alia, as a dealer in shares. On 15th, 20th and 26th April, 1965, the assessee purchased 4,129 shares of Chamurchi Tea Co. Ltd. not quoted in the stock market at the rate of Rs. 121.20 per share at a cost of Rs. 3,00,435. It also incurred, on account of stamps for the purchases, expenses aggregating to Rs. 3,824 on 27th April, 1965. THE total investment in the purchase of the said shares came to Rs. 3,04,259. Besides the above, Sushila Devi Kejriwal, the wife of Ram Saran Kejriwal, the partner of the assessee, purchased 500 shares of Chamurchi Tea Co. Ltd. on 20th April, 1965. One Baitakhal Tea Co. Ltd., a company controlled by the Kejriwal family, also purchased 500 shares of Chamurchi Tea Co. Ltd. By reason of the aforesaid purchases, the assessee and the members of the Kejriwal family came to hold 5,129 shares out of the total 10,000 issued shares of Chamurchi Tea Co. Ltd. and thereby came to hold a controlling interest in the said company.
(3.) AFTER the purchase of the said shares as aforesaid, seven of the existing directors of Chamurchi Tea Co. Ltd. resigned from the board of directors of the latter company during 1965 and in their place, Ram Saran Kejriwal, Shyam Saran Gupta, Nagarmal Kanodia, Narendra Kumar, Mrs. Sushila Devi Kejriwal, Mrs. Mridula Gupta and Somnath Beri, were appointed as directors of Chamurchi Tea Co. Ltd. The new directors all belonged to the Kejriwal group. This change of management was effected on and from 1st May, 1965. It is also on record that the head office of Chamurchi Tea Co. Ltd. was shifted to the residence of Kejriwals at Calcutta from its original head office at Jalpaiguri. Nagarmal Kanodia, one of the new directors of Chamurchi Tea Co. Ltd., at the material time, was employed in the firm, Ram Saran, a firm belonging to the Kejriwal family, as an accountant.;