LexM/S. RAJPUTANA TEXTILES (AGENCIES) LTD. versus THE COMMISSIONER OF INCOME-TAX, BOMBAY CITY
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- • I S.C.R. ·suPREME COURT REPORTS M/s. RAJPUTANA TEXTILES (AGENCIES) LTD. v. THE COMMISSIONER OF INCOME-TAX, BOMBAY CITY 917 (S. K. DAS, J. L. KAPUR, M. HIDAYATULLAH, J.C. SHAH and T. L. VENKATARAMA AIYAR, JJ.) Income Tax-Business transaction-Whether adventure in the nature of trade-Intention of the assessee-Pro.fits-Whether revenue or capital receipt-Advisory jurisdiction-Points not taken before High Court-Whether could be raised before the Supreme Court- Taxation on Income (Investigation Commission) Act, r947 (30 of r947), s. 8(5). The assessee company was promoted with .the idea of obtaining the Managing Agency of the Appollo Mills from M/s. Sassoon & Co., Ltd., who were holding 19,76,000 shares out of a total of 25 lakhs shares of Rs. 2 each. According to the agreement the assessee company had to take the whole of the block of shares belonging to the Sassoons and pay at Rs. 4-4-0 per share Rs. 12} lakhs for the managing agency. As the assessee company had only Rs. 20 lakhs as its paid up capital, it was necessary to sell 13 lakhs odd shares in order to pay off the Sassoons both for the Managing Agency and the shares. There- fore during the course of negotiations the promoters of the assessee company entered into an agreement with some brokers for the sale of Rs. 19,76,000 shares. As a result of the .sale of shares the assessee company received a sum of Rs. 16,52,600 as excess over the purchase price which amount on taxation was . held bv the Income-tax Officer not to be profits and therefore not taxable. The case of the 'assessee company was referred to the Investigation Commission. The Commission found that it was not the intention of the assessee company to retain the whole block of shares and that the sale of 13 lakhs odd shares was an adventure in the nature of trade, and directed that appropriate assessment be made, under the Indian Income-tax Act and Excess Profits Tax Act. At the instance of the assessee company the question was referred to the High Court under s. 8(5) of the Taxation on Income (Investigation Commission) Act, 1947, which held that there were materials to justify the finding of the Commission that the purchase and sale of about 13 lakhs odd shares was an adventure in the nature ot trade. An appeal was taken to the Supreme Court against this order. Held, that in considering the question whether the transac- tion was or was not an adventure in the nature of trade, the court had to take into consideration the intention of the assessee April rz. 918 SUPREME COURT REPORTS" [1962] z96z keeping in view the "legal requirements which are associated with the concept of trade or business". Rajputana In the present case, the transaction that consisted of buy- Textiles ing the managing agency of the Mill Company and the block of (Agencies) Ltd. shares held by .Sassoons was inescapably one of a commercial v. nature and had all the attributes of an adventure in the nature Cotnmissioner of of trade. Income-ta~, Held, further, that the jurisdiction which this Court would Bombay City exercise in appeal was of the same character that a High Court would exercise. Thus the question under Art. 14 of the Consti- tution could not be raised in these proceedings because this Court like the High Court was exercising its advisory j urisdic- tion and its power was confined to the question which arose before the High Court. Kapur J. M/s. Ramnarain Sons (Pr.) Ltd. v. Commissioner of Income- tax, Bombay, [1961] 2 S.C.R. 904, Tata Hydro-Electric Agencies, Bombay v. The Commissioner of Income-tax, Bombay Presidency & Aden, (1937) L.R. 64 I.A. 215, Commissioner of Income-tax, Central and United Provinces, Lucknow v. M/s. Motiram Nandram, (1939) L.R. 67 I.A. 71, Jonesv.Leeming, [1930] A.C. 415, Commis- sioner of Inland Revenue v. Reinhold, (1953) 34 T.C. 389 and Saroj Kumar Mazumdar v. Commissioner of Income-tax, West Bengal, Calcutta, [1959] Supp. 2 S.C.R. 846, distinguished. Kishan Prasad & Co. v. Commissioner of Income-tax, Punjab, [1955] 27 I.T.R. 49, Edwards v. Bairstow, [1956] A.C. 14 and G. Venkataswami Naidu & Co. v. The Commissioner of Income-tax, [1959] Supp. l S.C.R. 646, discussed. CIVIL APPELLATE JURISDICTION: Civil Appeal No. 282 of 1955. Appeal by special leave from the judgment and order dated March 20, 1953, of the Bombay High. Court in Income-tax Reference No. 31 of 1951. A. V. Viswanatha Sastri and J. N. Shroff, for the
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