LexM/S. RAMNARAIN SONS (PR.) LTD. versus COMMISSIONER OF INCOME TAX, BOMBAY
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904 SUPREME COURT REPORTS [1961] 1960 the result that there will not be any evidence ta.ken Sh . -.;: Oth by the committing Magistrate which could be used as mam v. "'substantive evidence under s. 288 of the Code. Even The state of if the prosecution takes that risk, the Magistrate shall Bombay exercise a sound judicial discretion under the second part of sub-s. (4) of s. 207A in forming the opinion Suhba Rao J. whether witnesses should be examined or not, and . any perverse exercise of that discretion can always be rectified by a superior court. But there may be a. case where the Magistrate can make up his mind definitely on the documents referred to in s. 173 without the a.id of any oral evidence and in that event he would be within his rights to discharge or commit the accused, as the case may be. In this view, it is not necessary to express our opinion whether even if the Magistrate acted illegally in committing an accused without tak- ing any evidence, the said illegality is cured either by x960 December 5. s. 537 of the Code or any other section thereof. In the result, the appeals fa.ii and a.re dismissed. Appoola dismisse,d. M/s. RAMNARAIN SONS (Pr.) LTD. v. COMMISSIONER OF INCOME TAX, BOMBAY (J. L. KAFUR, M. lI:IDAYATULLAH and J. c. SHAH, JJ.) lncom. Tax-Assessment-Purchase of shares for acquiring managing agency rights-Loss incurred in sale of such shares-If of a capital nature. The appellants, a private limited company, carrying on business as brokers, managing agents and dealers in shares and securities and having as one of their objects the acquisition of managing agencies, purchased shares of the Dawn Mills at a rate much higher than the market rate for obtaining the con- trolling voting right and thereby acquired the managing agency of the Mills. Later on, they sold some of those shares and suffered a loss of Rs. 1,78,438. The Income-tax Officer in asses- sing the taxable income disallowed the loss and the Appellate ' .. •r 2 S.C.R. SUPREME COURT REPORTS 905 Assistant Commissioner on appeal confirmed that order. The Income-tax Appellate Tribunal held that the shares did not become stock-in-trade of the appellants, but since the loss incur- red was incidental to their business of acquiring managing agency, it was allowable as a revenue loss. On reference, the High Court held that the shares acquired by the appellants were a capital asset and the loss suffered by the sale was of a capital nature. Held, that the High Court had taken the correct view of the matter and the appeal must fail. The question whether a transaction is or is not an adven- ture of the nature of trade has to be decided in the light of the intention of the assessee judged by the legal requirements asso- ciated with the concept o'f trade or business. Since the shares in question were purchased by the appel- lants with the intention of acquiring the managing agency and not in the course of their business as dealers in shares with the intention of trading in those shares and what was acquired by such purchase was a capital. asset in the shape of a managing agency, it could not be said merely because the managing agency could be utilised for earning profits. that those shares were stock-in-trade of their share business. G. Venkataswami Naidu and Co. v. The Commissioner of Income-tax, [1959] Supp. I S.C.R. 464 and The Oriental Invest- ment Co., Ltd. v. The Commissioner of Income-tax, Bombay, [1958] S.C.R. 49, referred to. ' CIVIL APPELL.A.TE JURISDICTION: Civil Appeal No. 698of1957. Appeal by special leave from the judgment and order dated August 2, 1956, of the Bombay High Court in Income-tax Reference No. 1 of 1956. A. V. Viswanatha Sastri, B. A. Pallcliiwala and G. Gopalakrishnan, for the appellant. Hardyal Hardy and D. Gupta, for the respondent. 1960. December 5. The Judgment of the Court was delivered by SHAH, J.-The High Court of Judicature at Bom- bay answered the following two questions referred by the Income Tax Appellate Tribunal, Bench "B", Bombay, under s. 66(1) of the Indian Income Tax Act, 1922: (1) Whether the acquisition of the managing agency M /s. Ramnarain Sons (Pr.) Ltd. v. Commissio11er of Income-tax, Bombay Shah ]. 1960 906 SUPREME COURT REPORTS [1961] of the Dawn Mills Co.,. Ltd., was in the nature of a "business" carried on by the assessee company? P.1 /s. Ra»1narain Sons (I».) Ud. (2) If the answer to the first questio
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