Law:

Section:

Income-tax-Income or capital-Assessee purchasing large block of shares with a view to acquire managing agency-Sale of entire shares within short period of acquisition-Profit arising from sale --Whether income or capital. The assessee-company purchased considerable number of shares in two other companies with a view to acquire the managing agency of those companies but within a short period after the purchase, sold the entire shares at a profit and claimed the profit as capital profit. The Income-tax Officer held the profit to be income. The Appellate Assistant Commissioner as well as the Tribunal found on the facts that the purchase and sale of these shares were made with the object of acquiring managing agencies only and not with the object of dealing in them by way 'of business. On a reference to the High Court: Held, the fact that shares were purchased and sold within a short time is equally compatible with the- shares being sold in the ordinary course of business as well as being sold on capital account and that, on the facts of the case, it was established that the purchase and sale of the concerned shares were in connection with acquiring the managing agencies of the com panies and, therefore, any profit or loss resulting from the transactions could not be treated as a revenue loss or profit but must be treated as a loss or profit on capital account. Commissioner of Income-tax v. Ramnarain Sons Ltd. (1957) 31 I T R 17 ref. STATEMENT OF CASE By these applications the Commissioner of Income-tax requires the Appellate Tribunal to refer to the High Court a question of law which is said to arise out of the order of the Tribunal in I. T. As. Nos. 6575 and 6676 of 1960-61. Inasmuch as in our opinion a question of law does arise out of the aforesaid order of the Tribunal; we hereby draw up a statement of the case and refer it to the High Court of Judicature at Bombay under section 66(1) of the Indian Income-tax Act, 1922. 2. The assessee is a private limited company incorporated on November 14, 1949, with a paid-up capital of Rs. 50,000 of which Rs. 37,000 was subscribed for by R. N. Kapur, its Chairman, and the rest as per statement of shareholders below:…