Law:

Section:

JUDGMENT Chandrachud, J.- The assessee, H. Hoick Larsen, was a partner in the firm of Messrs. Larsen & Toubro, which, on the 7th of February, 1946, was converted into a private limited company. On such conversion the assessee was allotted 53,486 equity shares of Rs. 10 each, against his interest in the partnership firm. He purchased, in addition, 1,875 equity shares for cash consideration. In 1950, so we are informed, the company was converted into a public limited company and in course of time the assessee became the chairman of its board of directors. From the 1st of April, 1947, to the end of March, 1954, the assessee acquired 1,994 shares of the company, all of which were offered by the company as right shares. During this period, the assessee sold 1,550 shares from his total holding. He was assessed for these years as an investor. He acquired further right shares and sold shares from his holding in the subsequent years ending 31st of March, 1958, and he was assessed for these years also as an investor. We understand that the Income-tax Officer has re-opened the assessments of 1957-58 and 1958-59 but with that we are not concerned here. We are concerned in this reference with assessment years 1959-60 and 1960-61 which correspond to the accounting years ended the 31st of March, 1959, and the 31st of March, 1960, respectively. The Income-tax Officer took the view that the assessee was an investor till the 31st of March, 1954, but that from the financial year 1954-55 the assessee had purchased and sold shares of the company with frequency and had become a dealer. The profits realised by the assessee during the two assessment years on the transactions in the shares of M/s. Larsen Toubro Ltd. and of certain other companies was, therefore, brought to tax as a revenue receipt. This view was confirmed by the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal. At the instance of the assessee the Tribunal has referred the following question for our opinion: "Whether, on the facts and in the circumstances of the case, the assessee was a dealer in shares in the accounting periods relevant to the assessment years 1959-60 and 1960-61?" Mr. Kolah,…

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