Law:

Section:

Section 2(13) , read with section 10(3) of the Income-tax Act, 1961 (Corresponding to section 2(4), read with section 4(3) of the Indian Income-tax Act, 1922) - Adventure in nature of trade - Assessment year 1947-48 - Assessee was carrying on business as share brokers, share dealers and paper merchants - One 'H' brother desired to sell shares of company 'S' held by them - 'D', solicitors of one company 'D' and assessees started joint negotiations with 'H' to purchase shares - One 'M' was also negotiating to acquire controlling interest of company-'S' - 'M' wrote a letter to 'D' showing their interest and in settlement offered certain amount to be payable to 'D' on transfer of shares - Finally, desired share holdings of 'H' brothers were purchased by 'M' and thereupon, he made certain payment as agreed to 'D' which was equally divided between 'D' and assessee - Whether in view of fact that payment made to assessees and their associates for rendering services in acquiring controlling interest for 'M' and not for dissuading them in competing for purchase of shares, receipts could be said to arise from business of assessees, and was not exempt under section 4(3)(vii) of 1922 Act - Held, yes FACTS The assessees were carrying on business as share brokers, share dealers and paper merchants. In 1946, 'H' brothers, who held shares of a company 'S', desired to dispose of their share-holdings. On 'D' , the solicitors of company 'D' and the assessee started joint negotiations with 'H' to purchase controlling interest of the company. One 'M' was also negotiating to secure controlling interest in company 'S'. 'M' wrote a letter to 'D' and the assessee showing their interest and in settlement offered certain amount to be payable on completion of the transaction. 'M' purchased the desired shareholding of 'H' brothers and thereupon also made payment as agreed to 'D' which was equally divided between 'D' and the assessees. For the assessment year 1947-48, the assessees showed aforesaid receipt as income from 'brokerage in the course of business'. Later, the assessees submitted a revised return excluding the aforesaid amount. The ITO rejected the claim of the assessees that the…

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