RAMESHWAR PRASAD BAGLA versus COMMISSIONER OF INCOME-TAX, U.P., LUCKNOW

Citation: [1973] 2 S.C.R. 452 · Decided: 27-09-1972 · Supreme Court of India · Bench: K.S. HEGDE · Disposal: Appeal(s) allowed

Judgment (excerpt)

4 52 
RAMESHW AR PRASAD BAGLA 
v. 
COMMISSIONER OF INCOME-TAX, U.P., LUCKNOW 
September 27, 1972 
(K. S. HEGDE, P. JAGANMOHAN REDDY, I. D. DUA AND 
H. R. KHANNA, JJ.] 
Indian Jncon1e Tax Act, 1922, Sec. 66(2)-Powt•rs of High Court 
and Supren1e Court nut appellate hut 011/y advisory. 
Sec. 10, Sec. 12, (b) ll'hctlu•r surplus realised on the sale of shares 
originally hou;.:ht for the contrul of the Co111pany and obtaining nianaging· 
axency, is lit1hle to tax ar _apital Rains or as profit ott sale of shares. 
The appcllant-a<Sessec is a partner in A. & Co. Managing Agency 
oi one textile Mill was assigned by the 
Managing Agents 
(S. & C9.) to 
A. & Co. for consiJcration of huying large nun1bcr of shares and cash. 
·rhc appellant bought 31,250 shares. 
An equal nurnhcr of shares \\'as 
iransfcrrcd in his favour by h.s hrothcr. 
In 1946, the appellant sold 
43,700 shares resulting in the profit of Rs. 1,51.927. Before the income 
Tax Officer the appellant's content:on was that the surplus Y.'as in the 
natur~ of capital gains. 
The J.T.O. hoY.·cver, held that the amount y.·as 
liable to taxation u/s 10 of the Act as profits on the sale 0f share~. The 
tribunal remanded the case to the l.T.O. 
The appeal along with 
the 
remand report v.·as plt.11.:cd he'iorc the 
Tribunal 
for hca ing. 
After 
carefully considering al! the evidence the ·rrihunal heh.! th:.i.t the shares 
\\'CfC purchased not 'as stuck-in·tra<le hut for securing the 
managing 
agency and co:itrol of the company. The Tribunal further held that the 
surplus on sale of 5harcs is not incon1e y.·hich is liabh: to income tax under 
sec. IO. 
Thereafter, the Tribunal, on the High Court's direction dre\v 
up a statement of case u/s 62 (2). 
The High Court reversed the fin-
dings of the Tribunal and hclJ against the appellant. 
HELD : 
There \\'as enough m.itcrial a:id evidence referred to by 
the Tribunal \\'hilc recon.ling its finding that the shares in question had 
been purchased by the asscssce with a view to acquire the manz.ging 
agency and control of the textile mill anJ 
that the 
shares did 
not 
constitute stock-in·tradc of the assessce. 
It is for the Tribunal to decide 
the question of fact and the High Court in a reference u/s 66 of the 
Act cannot go beh\nd the Tr;bunal's finding of fact. 
The High Court 
can only lay down the law applicable to the facts of the ca<;e found by the 
Tribunal. The High Court and the Supreme Court. in an appeal ag~;nst 
the Judgment of the High Court, in a reference u/s 66 of the Act are 
Flot COI'Mitituted courts o'f appeal. 
These courts only exercise advisory 
jurisd:ction in such references. 
Only in case Y.'here the finding is not 
based on any relevant evidence or is based on conjectures or suspicion, 
a qucs~·ion of Jaw is raised and interference with the finding of facts is 
permissible. 
The High Court was not justified in 
setting . aside 
the 
finding of fact in the instant case. (457 CJ 
On facts we arc of the opinion that the profit made by the sale of 
shares constituted capital gain chacgeable to income tax u/s 12 (b). 
Indeed it was the prayer of the assessee himself in his letter dated March 
30, 1949. 
Ra1nnarain Sons (P\'t.) Ltd. v. Con1111issioner of !nC0111e-tax, [1961)41 
l.T.R. 534 relied on. · 
A 
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A 
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R: P. BAGLA \', C.I.T, (Khanna, J.) 
453 
CIVIL APP ELLA TE JURISDiCTION : Civil Appeal No. 1718 of 
1969. 
Appeal by special leave from the judgment and order dated 
February 20, 1967 of the Allahabad High Court in Misc. Case 
No. 561 of 1963. 
Bhagirath Das, H. K. Puri, S. K. Hirajee and S. K. Dhingra, 
for the appellant. 
S. Mitra, -B. D. Sharma and R. N. Sachthey, for the respondent. 
The Judgment of the Court was delivered by 
KHANNA, J. This appeal by special leave is directed against 
the judgment of Allahabad High 
Court whereby 
that court 
answered the following two ques:ions in a reference made to it 
under section 66(2) of the Indian Income Tax Act, 1922 (here-
inafter referred to as the Act) : 
. ·• ( i) Whether there was material for 
the finding 
that the shares in question were 
purchased by 
the 
assessee with a view to acquire the managing 
agency 
and the control of the company or the shares constituted 
his stock-in-trade '? 
(ii) Even if the shares in question did not constitute 
the stock-in-trnde of the assessee, whether the p10fit 
made on the sale of shares did not constitute capital 
gain chargeable to income tax under section 12-

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