LexTHE NEW JAHANGIR VAKIL MILLS CO., LTD. BHAVNAGAR versus THE COMMISSIONER OF INCOME-TAX, BOMBAY NORTH, KUTCH & SAURASHTRA, AHMEDABAD
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• - . 2 S.C.R. SUPRENIE COURT REPORTS 971 THE NEW JAHANGIR VAKIL MILLS co.,-LTD. BHAVNAGAR v. THE COMMISSIONER OF INCOME-TAX, BOMBAY NORTH, KUTCH & SAURASHTRA, AHMEDABAD (S. I\. DAS, A. K. SARKAR and M. HIDAYATULLAJI jj.) Income Tax-Aase,.ee dealer in shares and securities-In- come from sale shares, if revenue receipt-Profits if be computed on basis of difference between original cost price and price realized at the sale-Res judicata, if appliable ta matters of taxation -Taxing authorities if can consider position of assessee before the assessment year. The assessee appellant carried on the business of manu- facturing and selling textile pit-ce·goods. In the assessment year 1945-46, the Income-tax Officer added to the taxable income of the assessee a sum of Rs. L86,931 which \-Vas later on reduced to Rs. 1,23,840 as a revenue receipt, representing an amount by which the sale price exceeded the orginal cost of certain shares and securities purchased and sold by the appellant. The assessee was held to be a dealer in shares and sec,µrities. The contention of the a'isessee was that it was not a dealer in shares and securities in the relevant account year or in the years past and the shares and securities were held by way of investment and the investment surplus was in the nature of capital receipt. Even if the assessee was a dealer in shares and securities in the relevant account year, the Income-tax Officer committed an error in the matter of the computation of profits in not taking the 1narket value of the shares as at the opening day of that year as the cost thereof. The Appellate Assistant Commssioner rejected the contentions of the appellant and held that the number of transactions was sufficiently large to show that the assess<e was a dealer in shares. The Appellate Tribunal rejected the contentions of the appellant. These assertions were then referred to the High Court and they were decided against the assesscc-appellant, 1963 A;ril JO. 1963 N1w JtWM:ir Vokii Mill• C.., l.td llhaunag~r v. Commi;siOAtr of /nCfmt ·tax, B•mha1 NMlii Ku1c .. , &! Sau· ra1h1,a, !lmtttlabad I as J. 972 SUPREME COURT REPORTS (1964] VOL. Held that the asscssee ,,·as a dealer in shares and securities and the income from their sale \\·.as a rcvr.nue receipt and not capital receipt. The profits of the assessee were the difference bet\\'Cr.n the original cost prict· of the shares to the assessce at the time of purchase and thr price rcalizec.J at the tiine of sale. field also that in the nlattcr or taxation, there \'/as no question of resjudicata" It \V<lS open to the taxing auth·,rities to consider the position of the aS!es'ce in 1943 for the purpose of detrrmining hov.· 1he gains made in 1944 should be com- puted, even though the suh_ject of the assessmcut proceedings \\'as the cornputation of the profits n1a<le in 1914. l"hc circu- mstance that in an t"arlicr assessment relating to 1943, the assessee \\'as treated as an investor \VOuld not estop the assessin~ authorities from consirle1 in~, for the purpose of computation of the profits of 194·1 1 as to when thr: trading activity of the assesscc in shares began. 'l'he assessing authoritirs found that it began in 1943 and on that finding, the profits were correctly computed. (}ornmissioner of Income-tax v. Bai ,<)hiriHbai K. Kooka, 11952] Supp. 3 S.C.R. 391, Broken l/ill Prop<rly Company v. Broken Hill Municipal Council, [1926] A.C. 94, Hoyst<ad v. Commi-.q°<mcr n.f Tu.ration, [ 1926] A.C. 15:>. Society of Medical Officu of lle"lth v. Hope, (1960] AC. 551, Cuffonr v. Inr.mne· tax Commi,.oimier, ( 1961 J A.C. 584 and ln .. talme11t Supply (l') Ltd. v. Union of India, [1962] 2 S.C .. R. 644, referred to. Cn·rr, APPELLATE Jc!USDIC'l'Io:>": Civil Appeal No. 445 of 1962. Appeal from the judgment and order dated April I I and 12. I !JOO, of the Bombay High Court in Income-tax Reference ;\lo. :i2 of 195!!. R . ./. l<:f!/Jih and /.S. Shroff, for the appellant. K. N. Rrijugf!pnl Sastri, anJ H.S. Sachthey, for the respondent. 1963. April 10. The .Judgment of the Court was delivered by S. K .. DAR, ].-This is an appeal on a certi· ficate of fitness granted by the High Court of • - ' ,. . - , . 2 S.G.it SUPREME COURt REPORTS 973 Bombay under s. 66-A (2) of the Indian Income-tax Act, 1922. The New Jehangir Vakil Mills Co., Ltd .. Bhavnagar, appellant before us and called the assessee, carried o
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