RAJA BAHADUR VISHWESHWAR SINGH Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THESE are five miscellaneous judicial cases in which this Court required the Tribunal to state a case on the following two questions of law :

(2.) THE relevant facts are these. The assessee is a zamindar, being the brother of the present Maharajadhiraj of Darbhanga. He owns and possesses big zamindari property, known as the Rajnagar estate, under a maintenance grant. The assessee had been purchasing shares and securities from the Fasli year 1336 onwards (corresponding to the asst. year 1930 -31). In their statement of the case, the Tribunal has divided the assessments for the period 1930 -31 to 1948 -49 into three periods, the years being (1) 1930 -31 assessment year to 1940 -41 assessment year ; (2) 1941 -42 assessment year to 1943 -44 assessment year ; and (3) 1944 -45 assessment year to 1948 -49 assessment year. During the first period there were purchases of shares year after year, but there were no sales except in the Fasli year 1344 (corresponding to 1938 -39 assessment year). The profits arising on the sales in the Fasli year 1344 amounted to Rs. 83,807. That amount was included in the assessee's total income for the year 1938 -39 by the ITO. The CIT confirmed this inclusion by an order under S. 33, as it then stood ; but by a revised order dt. the 22nd May, 1941, the CIT excluded this sum of Rs. 83,807 from the assessee's total income for 1938 -39 on the ground that the amount was capital accretion and not "business profits." On the 16th July, 1940, the petitioner arranged with the Mercantile Bank Ltd., Calcutta, to allow him to overdraw his account by Rs. 10,00,000 on the guarantee of his brother, the Maharajadhiraj of Darbhanga, and against deposit of shares to be bought by the assessee. This overdraft arrangement was made for the purpose of buying shares and securities and under this arrangement certain shares of the value of Rs. 10,000 were bought on the 22nd July, 1940, and the value was debited to the assessee's account in the Mercantile Bank of India Ltd. Within five days of the aforesaid purchase, however, that is, on the 27th July, 1940, the assessee obtained in cash a sum of Rs. 10,00,000 from his brother, without interest, and paid the amount into his account with the Mercantile Bank of India Ltd., thereby wiping out the overdraft of Rs. 10,000. The overdraft arrangement with the Mercantile Bank came to an end and out of the sum of Rs. 10,00,000 provided by the assessee's brother the assessee purchased and sold shares and securities for large amounts. A separate set of account books was opened on the 22nd July, 1940, which were styled "No. 2 Investment Account" and the purchases and sales of shares made out of the sum of Rs. 10,00,000 were recorded in those books. There was another set of books called No. 1 Investment Account. In these books were entered the purchases and sales of shares which the assessee had been making since the 1930 -31 assessment year.

(3.) IN regard to the asst. year 1942 -43, the AAC excluded the sum of Rs. 39,326 from the total income for that year, relying upon the past history of the case. No profit was derived by the assessee from the sale of shares in the asst. year 1943 -44, as there were no sales in that year.