Law:

Section:

Section 13 of the Indian Income-tax Act, 1922 [corresponding to section 145 of the Income-tax Act, 1961]-Method of accounting-Charge on accrual, receipt or other basis-On 5-2-1948 assessee agreed to sell certain shares, without specifying serial numbers thereof, to J and D at agreed price-Neither J nor D paid said price nor were shares delivered to them-Under settlement made in february 1952, when market value of said shares had fallen, assessee purportedly repurchased these from J and D who paid it a certain sum being difference between price agreed upon in 1948 and current price-Whether there was a completed sale in 1948 so that amount received by assessee in 1952 could not be taxed as assessee's income in assessment year 1953-54-Held, on facts, no Facts The assessee-company, a dealer in shares, entered into an agreement with J and D on 5-2-1948 under which the sale of certain shares, held by the assessee, to J and D was agreed upon at a stated price. J and D did not pay the said price, nor were the shares delivered to them. Subsequently, by a settlement arrived at in February 1952, the assessee purported to repurchase these shares at the market price then prevailing (which had gone down) and was paid a certain sum by J and D on account of difference in price of shares. In the assessee's assessment for 1953-54, the ITO treated this sum received by the assessee from J and D, purportedly under a repurchase settlement made in February 1952, as the assessee's profits in respect of the sale of shares made to J and D under the agreement dated 5-2-1948 in pursuance of which J and D had neither paid the price of the shares nor were the shares delivered to them. Thus, the ITO took the view that the transaction of sale of the impugned shares had not become complete on 5-2-1948. On the contrary, the assessee claimed that the transaction of sale was completed on 5-2-1948 and all that was done by the settlement of February 1952 was that J and D paid the price contracted for originally and sold back the shares to the assessee. Consequently, according to the assessee, no profit had arisen in the previous year relevant to the assessment year 1953-54. This claim was rejected…

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