PATNAIK & CO. LTD. versus THE COMMISSIONER OF INCOME TAX, ORISSA

Citation: [1986] 3 S.C.R. 207 · Decided: 16-07-1986 · Supreme Court of India · Bench: R.S. PATHAK · Disposal: Appeal(s) allowed

Judgment (excerpt)

r 
A 
PATNAIK & CO. LTD. 
v. 
THE COMMISSIONER OF INCOME TAX, ORISSA 
B 
' 
JULY 16, 1986 
I. 
[R.S. PATHAK AND SABYASACHI MUKHARJI, JJ.] 
\ 
\ 
Business loss-Purchase of Government bonds or securities with 
the object of increasing the assessee's business with the Government 
c 
and/or retaining the goodwill of the authorities for the purpose of its 
business and loss incurred thereby-Whether capital loss or revenue 
loss. 
Jurisdiction of the High Court in a reference under the Income 
Tax Act-Interference with finding of facts, whether permissible. 
D 
Supreme Court Rules, 1966 Order XL VII Rule 6-Supreme 
Court can itself decide the questions referred to the High Court to avoid 
+ 
further delay instead of remanding the case. 
The assessee deals in automobiles and also sells spare motor parts. 
E 
For the assessment year 1963-64 the assessee claimed a loss of Rs.53,650 
sustained by ,it on disposing of its subscriptions to the Orissa Govern-
) 
ment floated Loan 1972. It claimed that the loss suffered by it was 
revenue loss and, therefore, deductible against the profits for future 
years. The Income Tax Officer and the Appellate Commissioner of 
\ 
Income Tax negatived the claim of the assessee. But ou second appeal, 
F 
mo( 
the Appellate Tribunal accepted the contention that the subscription to 
the Government loan was conducive to its business and that the loss 
arose in the course of the business, and that therefore, the assessee was 
entitled to a deduction of the loss claimed by it. But the High Court on a 
reference to it at the instance of the revenue, held that the loss was a 
capital loss. The High Court was of the view that the factual substratum 
G 
.J 
of the case had been misconceived by the Appellate Tribunal and that it 
\ 
was, therefore, entitled to re-examine the evidence and arrive at its own 
findings of fact. Hence this appeal by special leave. 
Allowing the appeal, the Court1 
H 
A 
B 
c 
D 
E 
F 
G 
H 
208 
SUPREME COURT REPORTS 
[1986] 3 S.C.R. 
HELD: 1.1 Whether Government bonds or securities were pur-
chased by the assessee with a view to increasing his business with the 
Government or with the object of retaining the goodwill of the 
authorities for the purpose of his business, the loss incurred on the sale 
of such bonds or securities was allowable as a business loss. l212F -GI 
1.2. Having regard to the sequence of events and the close prox-
imity of the investment with the receipt of Government orders i; is clear 
that the investment, in the instant case, was made in order to further 
the sales of the assessee and boost its business. In the circumstances, the 
investment was made by way of commercial expediency for the purpose 
of carrying on the assessee's business and therefore the loss suffered by 
the assessee on the sale of the investment must be regarded as a revenue 
loss. [211H; 212A-BJ 
1.3 No enduring benefit was brou~ht about by the assessee invest-
ing in the loan so far as the orders from the Government Departments 
were concerned. The material on record shows that on August 30, 1961 
it was decided to purchase 16 jeeps, 8 trucks and 4 one.tonne pick up 
vans. There was nothing to show that there was any reason for the 
assessee to hold on to the investment in the loan indefinitely. The invest-
ment did not bring in an asset of a capital nature, and that in the 
circumstances of the case the loss suffered by the assessee was a revenue 
loss and not a capital loss. l212D-F] 
Commissioner of Income· Tax v. Industry and Commerce Enter-
prises (P) Ltd., I 1979] 118 ITR 006 (Orissa); Additional Commissioner 
of Income-tax, Madras-II v. B.M.S. (P) Ltd., [1979] 119 ITR 321 
(Mad); Commissioner of Income-tax, Tamil Nadu-V v. Dhandayutha-
pani Foundry (P) Ltd., [1980[ 123ITR 709 (Mad) approved. 
2. It is now well settled that the Appellate Tribunal is the final 
fact-finding authority under the Income-tax Act and that the Court has 
no jurisdiction to go behind the statements of fact made by the Tribunal 
in tis appellate order. The Court may do so only if there is no evide~ce to 
support them or the Appellate Tribunal has misdirected itself in law in 
arriving at the findings of fact. But even there the Court cannot disturb the 
findings of fact given by the Appellate Tribunal unless a challenge is 
directed specifically by a question framed in a reference agiiinst the validity 
of the impugned findings of fact on the gronnd that there is no evidence to 
support them or they a

Excerpt shown. Read the full judgment & AI analysis in Lexace.