Law:

Section:

Section 28(i) of the Income-tax Act, 1961 [Corresponding to section 10(1) of he Indian Income-tax Act, 1922] - Business loss/deduction - Allowable as - Assessment year 1949-50 - Assessee, company was engaged in business of Sugar manufacturing - 'S' who was chairman of board of director of assessee, company held majority shares in company - "S" had advanced loan to it's sister concern "DP" Ltd to purchase share of a jute company, namely "JM" Ltd - Subsequently "DP"L td in turn sold shares of "JM" Ltd to assessee, company at Rs 680 per share - Thereafter in same previous year assessee sold those shares to "DI" Ltd at Rs. 520 per share who in turn sold those shares to "S" - Accordingly, assessee, company claimed loss on sale of said shares as business loss which was disallowed by ITO - In making said disallowance ITO had made observation that "S" was not only interested in management of "JM" Ltd. but also had purchased share of other two jute company and "DP" Ltd had transferred shares of said two companies to "S" at a loss of shares which "S" showed with its controlling companies including assessee - Whether in aforesaid circumstances, intention, motive or object of assessee-company in entering into transaction of purchase and sale of jute mills shares was not to trade in jute mill shares nor was it to acquire any capital advantage of acquisition of management of jute mill by assessee-company but was an ulterior one of helping chairman of its board of directors - Held, yes - Whether purchasing shares at rate of Rs. 680 as against market price of Rs. 523 and selling them at market price of Rs. 520 per share were nothing but a maneuver in accounts of assessee-company at instance of chairman of its board of directors for purposes of sharing with others his loss or loss of sister concern, namely "DP" Ltd - Held, yes - Whether therefore loss incurred by assessee was not in course of its trade or in an adventure in nature of trade and, was not permissible for deduction as business loss - Held, yes FACTS The assessee, company, were running sugar manufacturing factories. The chairman 'S' of the board of directors of the assessee-company, owned about 75 per cent of the…

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