Law: Income Tax Act, 1922

Section: 10(1)

Section 10(1) of the Indian Income-tax Act, 1922 - Business loss - Allowable as - Assessment Year 1948-49 - Deceased purchased certain shares in 1936-37 and was holding it though for three initial years he made some profits for need a nine years shares were sold at cost price without any profit or loss - During relevant year there was no broker or agent employed by assesses in respect of share transaction, no account book mere maintained and no record of share transactions was prescribed - Whether on facts loss incurred by assessee on sale of shares during relevant year could be allowed as business loss - Held, no FACTS From 1936-37 onwards, the assessee was holding shares either by purchase or by allotment upon application. During the accounting year relevant to the assessment year 1948-49, the assessee sustained certain loss on sale of shares of different companies. The assessee claimed it as business loss. The ITO disallowed the assessee's claim. On second appeal the Tribunal upheld the disallowance on the ground that the assessee was holding the shares all along for the purpose of investment and the loss arising from the sale thereof was a loss on capital account not allowable against the taxable income. On reference : HELD The question whether a transaction is in the nature of a trade is a question of mixed law and fact. During the periods 1935-36 to 1937-38, there were profits as well as losses. In the income-tax assessment, such profit and loss were shown and income-tax was paid on profits, and losses were allowed to be deducted. Then started a considerable length of time between the previous year from 1939-40 up to the accounting period for the assessment year 1947-48 when shares were invariably sold at cost and there was neither profit nor loss during the said period. The Tribunal inferred from this fact that during this period the assessee had ceased to be a dealer in shares. It also found that it could not be said that during the accounting year the assessee became a dealer, because the usual paraphernalia of business was not in existence, there were no brokers or agents employed by the assessee, in respect of the share transactions, no account books…

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