Law:

Section:

Income tax--Business income Shares Assessee, a share dealer Agreement to sell shares Neither transfer deed executed nor shares handed over to purchaser Price of shares not received Transaction not complete -Subsequent settlement of agreement by purchaser paying difference in market price Difference received by assessee Income exigible to tax. C. Kuppiah Chetty v. P. Saraswathi Ammal (1941) 11 Comp. Cas. 334 ; A I R 1941 Mad. 769 and Seth R. Dalmia v. C. I. T. I L R 1 Delhi 30 fol. Bank of India Ltd. v. Jamsetji A. H. Chinoy A I R 1950 P C 90 applied. Alfred William. Domingo v. De'Souza (L. C.) I L R 50 Ali. 695 ; A I R 1928 All. 481 Maneckji Pestonji Bharucha v. Wadiial Sarabhai &. Co. A I R 1926 P C 38 and Seth R. Dalmia v. C. I. T. (1977) 110 I T R 644 (S C) ref. JUDGMENT SACHAR, J. The question of law rrferred to this Court is as follows: "Whether, on the facts and in the circumstances of the case, the Income tax Appellate Tribunal was correct in coming to the conclusion that there. was a completed sale on February 5, 1948, and therefore, the sum of Rs. 3,59,559 was not liable to be taxed as the income of the assessee company?" ' . The assessee company is a dealer in shares. The case relates to the assessment year 1953 54. In the course of its dealings in shares it entered into some transaction on February 5, 1948, with one Mrs. Rama Jain for the sale to her of 52,000 shares of Dehri Rohtas Light Railway Company Ltd. and ef 22,500 shares of N. S. D. & Cold Storage Ltd. (valued at Rs. 8,40,500) and another with Mr. R. Dalmia for the sale of 7,5060 shares of Dalmia Investment Co. Ltd. (for the value of Rs. 7,80,000 (though the transaction related to some other shares also but the same is not the subject matter of reference before us). These shares were not taken delivery of nor was the price paid. But a settlement was arrived at in February, 1952 under which the assessee company purported to repurchase the shares at the market value then prevailing (which had gone down) and was paid an amount of Rs. 2,51,235 by Rama Jain and Rs. 1,05,000 by R. Dalmia on account of the difference in the price of shares (alongwith certain debentures owned by them). After…

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