LexCOMMISSIONER OF INCOME-TAX, BOMBAY CITY I, BOMBAY versus BAI SHIRINBAI K. KOOKA
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
3 S.C.R. SUPREME COuRT REPoRTS 391 tenant, the entry being "Tekan and others, Gairmau- rasian first through G~neshi Gair Maurasi second- half. The appellant is thus a tenant of the land of which he has taken lease and cannot be a landowner. keeping in view the definition of that term in the Act and in the Punjab L.and Revenue Act. The appeal therefore fails and is hereby dismissed with costs. Appeal dismissed. COMMISSIONER OF INCOME-TAX, BOMBAY CITY I, BOMBAY v. BAI SHIRINBAI K. KOOKA (S. K. DAS, J. L. KAPUR, P. B. GAJENDRAGADKAR, A. K. SARKAR, K. SuBBA RAo, K. N. WANCHOO and N. RAJAGOPALA AYYANGAR, JJ.) Income-tax-Profits-Shares purchased by assessee for investment-Sales of Shares subsequently as trading activity- Oomputation of profit. The assessee purchased shares by way of investment in 1939-40 at a cost price which was much less than their market value on April I, 1945. Her dividend income therefrom was assessed to income tax. In the financial year 1945-46 the assessee converted these shares iuto her stock-in-trade and carried on business in the shares. Per income for the assessment year 1946-47 was computed on the basis of the profits which she made by the sale of her shares as a trading activity. The assessee contended that the cost price of the shares for compu· ting the profits was their market value at the beginning of the year when she started the trading activity, i.e., on April I, 1945. The Department contended that the cost Price of the shares was the actual price for which they were purchased by the assessee, no matter when she bought them and for what purpose. Held (per Das, Kapur, Gajendragadkar, Suhba Rao, Wanchoo and Ayyangar, JJ. Sarkar, J., contra), •h•t the profits IS62 Tekon· v. Gtineshi Wonchoo J. 1962 February 23. 1962 Commissio1.e1 of lrr<omt-la.t, Bnmta), Ci!J l v. Bai Shitinhai K. Kooia 392 SUPREME COURT REPORTS (1962] SUPP. of the assessee from her business or trading activity must be computed on the basis that the market value of the shares as on April I, 1945, was the cost price of the shares for the business. The basis must be the ordinary con1rncrcial principle on which actual profits are computed, and normall)", the commercial profits out of a transaction of sale of an article are the differences, between what the article cost the business and what it fetcl1ed on sale, In Kikabhai Prcmclwnd v. Oommi.jsioner o.f lnr:oni~·tax, the Supreme Court was con- sidering the converse case and the principles laid down in that case were (1) that there was no general principle of taxation under income-tax Jaw under which the State could assess a person on the basis of business profits that he rnh~ht have made but had not chosen to make, and (2) that it was unreal to separate the business from its owner. Those prin· ciplcs have no application in the preijent case \Yhich is not a case of any potential future advantage; the admitted p:>si- tion in the present case is that there \\·as a sale of the shares in question in pursuancf". of a trading or business activity and actual profits had resulted from the sale. The question here is ho\V such cornn1ercial profits arc to be calculated. r n a trading or c:omrnercial sense the only fair measure of assess- ing such trading profits is to take the 1narkct value at one end and the actu~I sale proceeds at the other. 'fhis is more in accord \-Vith reality than fiction. Sir Kikabhai Premcltand v. (,101nmiasioner of Inc,,rnr.-tax (Central), Bom&ay, [1954; S. C.R. 219, Shorkr.y '" lVernhu (1955) 36 T. C. 275, referred to. Per, Sarkar J.-The asses.sec's taxable profits on the sale of the shares earlier held as investment are the difference bet\veen the sale price and the pric.c at ,,·hich she had ac- tually bought those shares. 'fhe profits could not be compu· ted on th? basis of a fictional sale Uy the asscssee to herself on 1\pril I, 19-t5. 'fhe case \vas governed by the principles laid down by the Supreme Court in Kikabhai's case. The decision of the House of Lords in Sharkey v. JVernher, , ... ·hich took a contrary vic\v, was not preferable to that of the Supr~mc Court in Kikabhai 's case. Sir Kikabhai Prenicl1and v. Commis"rionr.r of l11co111e- lax (Cent.ml), Bombay, JI !l54] S. C. R. 219, followed. Sharkey v. Jl'anher, [19551 36 T.C. 275, not approved. Cn'IJ, APPELLATE Jcms1J1c·1·10N: Civil Appeal No. 13:J of I!l58. Appeal by special leave from the judgment - 3 S.
Excerpt shown. Read the full judgment & AI analysis in Lexace.