SUHAS CHANDRA SEN, J. - (1.) THE following question of law has been referred to this Court by the Tribunal under S. 256(1) of the IT Act, 1961 : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the assessee had suffered a long-term capital loss of Rs.28.215 on account of the assignment and exchange of Promissory note to Shyamnagar Investment Co. (P) Ltd. against the allotment of shares of the face value of Rs. 9.15,900 by the said company to the assessee ?"
(2.) THE assessment year involved in this reference is the asst. yr. 1975-76, for which the relevant period of account is the period ending on 19th April, 1975. The facts of the case found by the Tribunal as stated in the statement of case are as under : The assessee-lady (since deceased) was being assessed as individual. Her accounting period for the asst. yr. 1975-76 ended on the 19th April, 1975. She has been keeping books of account according to which net profit worked out to Rs. 1,47,542. While filing her return of income for the aforesaid assessment year, the assessee claimed apart from losses and expenses debited in the profit and loss account, a further loss of Rs. 28,215 which was worked out by her by deducting from the balance due to her from Soorajmull amounting to Rs. 9,44,115, the sum of Rs. 9,15,800, which was the face value of the shares, which she had received from Shyamnagar Investment Co. Ltd. after assigning to the said company her rights in the debt due from Soorajmull referred to above. On enquiry, the ITO found that the aforesaid sum of Rs. 9,44,115 was balance of loan plus interest due to her from Soorajmull Nagarmull as on the 20th April, 1964, that on the 30th Nov., 1974 one of the partners of Soorajmull Nagarmull, namely, Sri Chirejilal Bajoria had executed a promissory note in her favour acknowledging to her the indebtedness of the firm to the extent of Rs. 15,25,483 towards the principal and interest due to her up to 30th Nov., 1974 and that the face value of the promissory note against which the assessee had received the aforementioned shares of Shyamnagar Investment Co. (P) Ltd. was Rs. 15,26,483. On the above facts the ITO held that, instead of there being a loss of Rs.28,215 as claimed by the assessee, an interest of Rs. 5,28,358 had accrued and arisen to her on the loan due from Soorajmull Nagarmull and that the aforesaid interest should be deducted as mentioned above was rejected by the ITO, by pointing out that there was no loss of the business debt in the deal. The ingredients of a debt entitled to be treated as bad debt as per provision of law are totally absent in assessee's case. The assessee is not a money-lender and she had no moneylending licence. She earned interest from deposit only. Hence, the question of allowance of bad debt, if any, does not arise. The assessee appealed against the aforesaid order to the CIT(A), who accepted the assessee's appeal with regard to the addition made by the ITO of Rs. 6,82,368. According to him, the said interest had not been received by the assessee and that receipt of the promissory note by the assessee did not amount to receipt of interest. The original claim of bed debt, which was put forward by the assessee before the ITO, was converted into one of business loss before the learned CIT(A). This claim was, however, negatived by the CIT(A) for the reasons given by the ITO. Against the aforesaid order both the Revenue and the assessee went up in appeal to the Tribunal. The Tribunal took up the appeal of the Revenue first and disposed it by its order in ITA No. 2379 (Cal) of 1979, dt. 23rd Sept., 1980. The Tribunal, after narrating the facts and noting the rival contentions, observed in paragraph 13 as follows : "It is admitted case of the parties that on the 3rd day of the execution of the promissory note, the assessee transferred all her rights under the same in consideration of 9169 shares of Shyamnagar Investment Co. (P) Ltd. of the face value of Rs. 91,900. The promissory note was probably obtained with a view to transfer her rights for those shares that she got in consideration of the loan standing due to her. Evidence was led on her behalf before the CIT(A) to show that the break-up value of those shares was even less than their face value. On the other hand, the representative of the Department referred to some other case wherein according to the Department the market value of the share of this concern of the face value of Rs. 100 has been found to be Rs. 166 and odd. As this matter has not been considered by the CIT at all, we are of the opinion that it shall go back to him for determining the exact market value of the shares which the assessee acquired in consideration of the promissory note and then to estimate the amount which she got in excess of the assets already shown and taxed as such. It may, however, be pointed out that the assessee was not carrying on any business and in any case if the market value of the shares is found to be less than the actual assets for which those shares were acquired, she would not be entitled to claim any business loss since it would amount to only an exchange of capital...." The Revenue was not aggrieved by the Tribunal's order, by which the case was remanded for finding out the intrinsic value of the shares and proceed on the basis of such valuation. When the case went back to the CIT(A), he passed an order to the following effect: "....I have looked into the computation of break-up value of such shares for the relevant assessment year as well as the valuation made on the 'field basis' such computations appeared to be wholly well grounded. So, viewed from one and different basis, as analysed above, the valuation of the shares of Shyamnagar Investment Co. (P) Ltd., were clearly below the face value of such shares. The conclusion, therefore, follows that there was no excess realised by her, which was available for taxation." Aggrieved by this order, the Revenue preferred an appeal before the Appellate Tribunal After hearing the parties, the Tribunal observed as follows: ".... The Revenue has not challenged the finding of fact given by the learned CIT(A) that the real value of the shares was less than the face value. In view of this, the conclusion has been reached by him in accordance with the direction of the Tribunal referred to above. The Revenue had accepted the said order of the Tribunal. The CIT(A) had, therefore, no alternative but to do as he was directed by the Tribunal." We fail to see how the Tribunal has committed any error of law. Moreover, the question whether the shares have been correctly valued or not has not been raised on referred.
(3.) IN the circumstances, the question is answered in the affirmative and in favour of the assessee. There will be no order as to costs.;