Law:

Section:

Section 28(i) of the income-tax act, 1961-Business deduction/loss-Estate administered by assessee-executor was allotted large chunk of shares in company m, held by a firm of which deceased was partner-Deceased was dealer in shares, and aforesaid allotment was made at market value which was half of face value-Since m decided to sell 51 per cent of its shares to government at nominal price, assessee, as one of principal shareholders, had to sell bulk of its shareholding in the transaction with government and suffered loss-Admittedly, assessee was member of stock exchange and dealt in several other scrips held by estate-Whether shares of m acquired by assessee on distribution of assets of firm constituted stock-in-trade of assessee, so that loss suffered by it in transaction with government was revenue loss-Held, on facts, no-Whether impugned loss was a capital loss-Held, on facts, yes Facts The assessee was the executor of the estate of deceased P, who, before his death, was a partner in a firm and did other business also, including that of a share dealer. This firm was acting as managing agents of company M and held a large number of the shares of the said company, which were listed on the stock exchange. The firm was dissolved after P's death. In the consequential distribution of assets, a large number of shares of M held by the firm were allotted to the assessee at the market rate of Rs. 5 per share, although their face value was Rs. 10 per share. In order to tide over its financial difficulties, M was forced to sell that 51 per cent of its shares to Government at the rate of 2½ paise per share only. As a result of this arrangement, a large number of the shares held by the estate of P were transferred to the Government by the assessee at the rate of 2½ paise per share only. The assessee claimed the loss in this transaction as a revenue loss. The ITO accepted the claim, but the Commissioner set aside the ITO's order, holding that the shares constituted a capital asset in the assessee's hands and the resultant loss was a capital loss. On appeal, the Tribunal accepted the assessee's claim in respect of the entire loss being a revenue loss, on the ground that the…

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