COMMISSIONER OF INCOME TAX CENTRAL Vs. ASSOCIATED INDUSTRIAL DEVELOPMENT CO P LTD

JUDGEMENT

(1.) The assessee-company held 42,200 shares of the Chemical Manufacturing Co. of India Ltd. The shares had been purchased by the assessee for a total sum of Rs. 2,56,936. By a special resolution passed by the shareholders in an extraordinary general meeting on the 8th September, 1951, the said company, namely, the Chemical Manufacturing Co. of India Ltd., went into voluntary liquidation and a liquidator was appointed for the winding-tip of the company. By 11th July, 1955, the liquidators had paid to the assessee a sum of Rs. 2,80,400 as dividends. This reference arises out of the assessment for the assessment year 1957-58, the previous year being the period from April 1, 1956, to March 31, 1957. On the 26th September, 1956, during the course of the previous year relevant for the present assessment, the assessee received a further sum of Rs. 21,100 from the liquidators as refund of capital at the rate of 50 nP. per share on 42,200 shares mentioned hereinbefore. The question is whether the said sum received by the assessee on the 26th September, 1956, is assessable as capital gains under Section 12B(1) of the Indian Income-tax Act, 1922.

(2.) Section 12B(1), as it stood at the material time and leaving aside the provisos which are not material for the purpose of this reference, is in the following terms:

(3.) The Income-tax Officer held that, inasmuch as shares were held as capital assets and inasmuch as the entire cost of the acquisition of the shares had been recovered prior to the previous year relevant for this assessment year, this additional receipt of Rs. 21,100 on 26th September, 1956, attracted the provisions of Section 12B(1) of the Indian Income-tax Act, 1922. There was an appeal before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner set aside the order of the Income-tax Officer holding that no amount was received by the assessee in the accounting period under consideration. There was a further appeal by the revenue authorities before the Income-tax Appellate Tribunal. The Income-tax Appellate Tribunal observed to the following effect: