LexDALHOUSIE INVESTMENT TRUST COMPANY LTD. versus COMMISSIONER OF INCOME-TAX (CENTRAL), CALCUTTA
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B c D E F G DALHOUSIE INVESTMENT TRUST COMPANY LTD. v. COMMISSIONER OF INCOME·TAX (CENTRAL), CALCUTTA November 22, 1967 [J. C. SHAH, V. RAMASWAMI AND V. BHAGRAVA, JJ.] Indian Income"'ax A.ct, 1922 (11 of 1922), s. 2(4) Purchase and sale of share when. amounts to adventure in the nature of Trade-Previous findillgs of Tribunal whether blndillg in subsequent assessment years. The principal activity of the assessee was investment of its capitals in shares and stocks. It changed its investments by sale of its shares and stocks from time to time. The assessee's income was primarily derived from dividends on shares and interest derived by it on the Investments. The assessee purchased the shares of a company V>hen their prices were falling by taking loan at lnterest and the return on investment was not at all substanti"1. The assessee's explanation that the shares were, in fact, being held as investment and \\'-ere sold simply because the. co111:rol of the company went out of the hands of the Directors of the ass-esscc, was not accepted by the Tribunal. HELD : The incJme derived by the 1 asscssce from tlie sale of these -shares was revenue n~ceipt and as such taxable under the lncon1c·tax Act. From the evidence about the course of dealings and conduct of the as.sessee, the conclusion followed that the purchases of the shares were not for the purf)ose of keeping controlling interest in that company, or for investment, but shares were being pµrchased and sold for earning profit, so that the transactions were an adventure in the nature of trade in these shares. [359 A-Bl . '• The acceptance by the Reveoue, in the earlier.years, that the acquisi·c tions and sales of shares were in the nature of invesunents, was not bind- ing in the proceeding for assessment during subsequent years. [356 B-C] Bengal and Assam Investors Ltd. v. Commissioner of Inco1ne-tax, West Bengdl, 59 I.T.R. 547 and Commissioner of Jnc.on1e.tax v. Bai Shrinbai K. Kooka, 46 I. T.R. 86, referred to. Ram Narain Sons (P) Ltd. \', Commissioner of Income-tax, Bombay, 41 l.T.R. 534, held inapplicable. CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 581 to 584 of 1966. Appeals by special leave from the judgment and order dated March 26, 1964 of the Calclltta High Court in J ncome-tax Reference No. 6 of 1961. A. K. Sen, Bishan Narain, R. K. Chaudhuri and E. P. Mahesh- H wari, for the appellant (in a]J the appeals). Niren De, Solicitor-General, T. A. Ramachandran, R. N. Sa~hthey and S. P. Nayar, for the respondent (in all the appeals) 354 SUPRBME COURT REPORTS (1968] 2 S.C.R. The Judgment of the Court was delivered by Bhargava, J. These appeals came up before this Courl'on the 17th April, I 967, when an order of remand was made by this Court, asking the Income-tax Appellate Tribunal to submit a fur- ther statement of the case. The question that has come up for consideration is :- "Whether on the facts and circumstances of the case, the surplus derived by the assessee in the sale of its shares and securities in the relevant previous years was a reve- nue receipt and as such taxable under the Income Tax Act." The facts and circumstances under which the question was referred by the Tribunal for the opinion of the High Court are mentioned in that order of remand and need not be repeated. In the order of remand, it was pointed out that it was not pos.sible to find out from the statement of the case whether tlte Tribunal accepted tl1e explanation of the assessee that, in the pre- vious year relevant to the assessment yqr 1953-54, the control of McLeod & Co. Ltd. went out of the hands of the Directors of the assessee and it was for thi<; reason that the assessee sold the shares of McLeod & Co. It was also pointed out further that the 'Yribunal had not stated what was the object of the assessce in buy- ing 6,900 ordinary shares of McLeod & Co. It appeared from the order of the Income-tax Officer that these shares were purchased in a number of lots from the year I 948 to I 950, and it was also not stated as to what was the object in buying other securities, and why did the assessee confine its activities mostly to th.; shares of McLeod & Co. Ltd. and the companies managc:P by McLeod & Co. Ltd. . It was in the light of these omissions that the Tribunal was asked to send a supplementary statement. That supplement- ary statement has now been received and the answer to the questiorr has to be gi
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