Law:

Section:

Income tax--Business income Income from other sources Company Purchase and sale of shares of inter connected companies No evidence that transactions were imposed on companies Transactions, held, amounted to business income and not income from other sources Word "business" .Meaning of. New India Sugar Mills Ltd. v. Commissioner of Sales Tax (1963) 14 S T C 316 (S C) distinguished. Loka Shikshana Trust (Sole Trustee) v. C. I. T. (1975) 101 I T R 234 (S C) ; State of Gujrat v. Raipur Mfg. Co. (1967) 19 S T C 1 (S C) ; State of Rajasthan v. Karam Chand Thappar & Brothers (1969) 23 S T C 210 and C.I. T. v. Lahore Electric Supply Co. Ltd. (1966) 60 I T R 1 (S C) ref. JUDGMENT RANGANATHAN, J. This is a reference under section 256 (1) of the I: T. Act, 1961, pertaining to the case of Bharat Development Pvt. Ltd. The relevant assessment years are 1962 63 and 1963 64 for which the corresponding previous years ended on the 31st October preceding. In the proceedings for assessment for these two years, the assessee claimed that the surplus realised by it on purchases and sales of shares effected during the accounting years should be treated as its income from business. The I. T. O. repelled this contention and held that the surplus was chargeable under the head "Income from other sources". In his opinion, the transactions could not be held to amount to a business for the following reasons (1) The shares are of private limited companies in which no person can have any dealings. (2) Even Dalmia Dadri Cement Ltd., which is a public limited company is controlled by R. Dalmia and the question of anyone dealing in these shares does not arise. (3) None of the shares are quoted at stock exchange. All the shares are treated as investments in the balance sheet. (4) Purchases and sales of shares during the years under appeal were only to those companies which were controlled by R. Dalmia and most of the purchases and sales were either to or from R. Dalmia or to or from his nominees or to and from the employees of the companies controlled by him. Even shares sold by the assessee to R. K. Rallan & Co., and to Messrs Rajpal Chadha & Co., had been passed to R. Dalmia on the…

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