LexRAJA BAHADUR VISHESHWARA SINGH AND OTHEHS. versus COMMISSIONER OF INCOME-TAX, BIHAR AND ORISSA
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
3 S.C.R. SUPREME COURT REPOR'l'S
287
deriving the agricultural income" are used in the latter.
196.0
If anything the words of the former Act are more
.t:
bl
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d
The Commissiontr
1avoura e to t e respon ent.
,
.
of Ag>icultural
In Travancore Rubber and 'I ea Company Ltd. v.
Income-ta.>
Commissioner of Agricultural Income Tax, Kerala ('),
v.
which was an assessment under the Travancore
The Calva'Y
Cochin Act, we have decided the question of deducti-
Mount Estates
bility of sums expended for purposes of forking,
(P,ivat<) Ltd.
manuring etc .. of immature rubber trees. That judg-
Kapu' J.
ment will govern this case also. This appeal there-
fore fail.s and is dismissed wi~h costs in this courL and
the High Court.
Appeal dismissed
RAJA BAHADUR VISHESHWARA SINGH
AND OTHEHS.
v.
COMMISSIONER OE' INCOME-TAX, BIHAR
AN'D ORISSA
(J. L. KA!'UR, M. HIDAYATULLAH and J.C. SHAH, JJ.)
Income Tax-l'urihase and sate of shares and scwrities with
surplus tn.oney-Such transactions, if amount to investment or busi·
ness in shares~Test-Excess sale proceeds-If amou,nt to business
profit or mere accretion to capital-Indian Income-tax Act, 1922 (II
of 1922), s. 66(2).
The appellant used to invest his cash surplus in shares and
securities and maintained an account book called Book No. l
relating thereto. During the period from 1930 to 1941-42 he
purchased a large number of shares and securities which by the
accounting year 1941-42 were of a value Rs. 14·91 lacs. He sold
certain shares and se<;urities of the value of several lacs and
made certain amount of profit on those sales. In 1940 the appel-
lant borrowed a large amount of money from his brother, the
Maharaj a of Darbhanga and opened a new account named account
No. 2 \vhich contained all entries regarding shares purchased
and sold out of the money borrowed from the Maharaja. In the
assessment year 19-14-45 to 1948-49 the profits made by ti)e
(1) [i961] 3 S.C.R. 279.
Decetnbe" z5.
288
SUPREME COURT REPORTS
[1961]
1960
appellant from purchase and sale of shares amounted to several
lacs and the Income-tax Officer held those to be liable to income·
Raja Bahadur
tax as business profits. The Appellate Assistant Commissioner
Visheshwara Singh upheld the assessments but excluded the profits for the years
& Another
1944-45. On appeal by both the ;>arties the Appellate Tribunal
v.
held on the evidence that the appellant was to be regarded as a
Cominissioner of dealer in shares and securities and therefore the profits were
Income-ta<, Bihar assessable to income-tax. The High Court stated the following
& Orissa
two questions under s. 66(2) of the Income-tax Act and answered
them in the affirmative:-
"(r) Whether in the circumstances of the case, there is
material to support the finding of the Appellate Tribunal that
the assessee was a dealer in shares and securities with respect to
each of the aecount and, therefore, liable to be taxed?
(2) Whether having regard to the finding of the Appellate
Tribunal in respect of 1941-42 assessment, it was open to the
Appellate Tribunal in the present case to hold that the profits
and transactions of sale and purchase of shares and securities
amounted to profits of business and so liable to be taxed?"
On appeal by special leave the appellant contended inter alia,
that being a Zamindar the buying and selling of shares was not
his normal activity and he did not carry on any such business
but his purchases and sales were in the nature of investments of
his surplus monies and therefore the excess amounts received
by sales were capital receipts being merely surplus and r;ot
profits.
Held, that on the materials produced and on the facts proved
the appellant mu;t be held to have been rightly assessed. The
principle applicable to such transactions is that when an owner
of an ordinary investment chooses to realise it and obtains a
higher price for it than t.he original price paid by him, the
enhanced price is not a profit assessable to income tax, but where
as in the present case what is done is not merely a realisation or
a change of investment but an act done in what is truly the
carrying on of a business the amour.t recovered as appreciation
will be assessable.
G. Venkataswami Naidu 0- Co. v. The Commissioner of
lncome-ta:c, (1959] Supp. I S.C.R. 464, Oriental Investment Com-
pany Ltd. v. The Commissioner of Income-tax, [1958] S.C.R. 49,
Raja Bahadur Kamakshya Narain Singh v. CoExcerpt shown. Read the full judgment & AI analysis in Lexace.