COMMISSIONER OF INCOME TAX BOMBAY CITY I BOMBAY Vs. BAI SHIRINBAI K KOOKA

JUDGEMENT

(1.) THE following was delivered by Judgment of the court : (For himself and Kapur, Gajendragadkar, K. Subba Rao, Wanchoo and N. Rajagopala Ayyangar JJ.)

(2.) THIS is an appeal by special, leave grante I by this court on September 17, 1956. The Commissioner of Income-tax, Bombay, City 1, is the appellant before us. The respondent is Bai Shirinbai K. Kooka, who will be referred to in this judgment as the assessee.

(3.) THE learned Additional Solicitor General who' has appeared on behalf of the appellant in this case has contested the correctness of the above line of approach. He has submitted, firstly, that the distinction drawn by the High court between Kikabhai's case (1) and the present case is not warranted on principle: secondly, he has contended that the ratio in Kikabhai's case (1) should apply in the present case also; and thirdly, he has contended that in holding that the price of the shares should be the market price as on 1/04/1945, when the shares were converted into stook- in-trade the High court In effect held by a legal fiction that the assessee had realised the potential profits on the said shares on that date which she had not actually done and Hence the very basis of the judgment of the High court is vitiated by the assumption of a fiction. THE learned Additional Solicitor General has also submitted that there was no warrant for the High court to introduce a legal fiction that there was a notional sale of the shares on 1/04/1945, by the assessee and that the gains which accrued to the assessee on that sale were capital gains; this notional sale it is submitted, violates the basic principle that a man cannot sell to himself nor can he make a loss or profit out of transactions with himself.