COMMISSIONER OF INCOME TAX Vs. CALCUTTA DISCOUNT CO LTD

JUDGEMENT

(1.) THIS reference under s. 66(1) of the Indian IT Act, 1922, relates to the asst. yr. 1947-48. The assessee floated a subsidiary company called "M/s Clive Row Investment (Holding) Co. Ltd." during the previous year. To the newly formed company the assessee transferred various shares which the assessee had held. In lieu of these transfers the assessee received shares of the new company valued at Rs. 1,38,81,173. The cost price of the shares which the assessee transferred to its subsidiary was Rs. 1,66,69,391. Apparently, by this transaction the assessee suffered a loss but in the assessee's P and L a/c this loss was not claimed as a deduction on the ground that the transfer of shares to the subsidiary was not a business transaction.

(2.) THE ITO found that the market price of the transferred shares was Rs. 2,69,09,937. He called for an explanation for these transfers at a rate which was below the market rate and even the cost price but was not satisfied with the explanation offered. He added the difference between the market price and the cost price amounting to Rs. 1,02,40,546 as the assessee's profit on the sale of shares to its subsidiary.

(3.) THE Tribunal refused to entertain these additional grounds. THEreafter, it dealt with the maintainability of the appeal and eventually dismissed it. THE Tribunal passed its "interlocutory order" on the additional grounds on the 22nd July, 1964, and its final order of dismissal on the 3rd September, 1964. In the final order it stated, inter alia, in the context of its "interlocutary order" on the 22nd July, 1964, rejecting the additional grounds, that when the ITO "has no grievance against the order of the AAC setting aside the assessment and directing a fresh assessment, on the lines indicated by the AAC, it would be purposeless to dispose of the grounds of appeal actually taken by the ITO."