Law:

Section:

JUDGMENT K.L. Roy, J.- The assessee is a company. Its main activity consists in acting as the managing agents of a large number of companies. The assessee held also substantial shares and securities which in its balance-sheet for the year ending March 31, 1955, were shown at cost at over Rs. 1,20,00,000. In the course of its assessment for the year 1955-56, for which the corresponding previous year was the financial year ending March 31, 1955, the Income-tax Officer found that during the preceding 15 or 16 years the assessee had substantial transactions in the purchase and sale of shares. In this year the assessee had claimed a loss of Rs. 91,963 in its business of dealing in shares. According to the Income-tax Officer, the loss claimed was on account of losses alleged to have been suffered in the sale of the following shares, viz., 139 debentures in Malwa Sugar Mills Company Limited (loss Rs. 646); 200 preference shares in the United Collieries Limited (loss Rs. 4,000) and 2,500 ordinary shares in Karamchand Thapar and Sons Limited (loss Rs. 1,04,592). The Income-tax Officer was of the opinion that the assessee was not a dealer in shares and the sales of the shares in which the losses were alleged to have been incurred were not genuine for, inter alia, the following reasons: (i)The shares sold during the year were mostly shares of companies managed by the assessee and as the managing agents it was incumbent on the assessee to hold the required number of shares in these companies. The sales were to associated or managed companies and even when sold to regular brokers, the shares ultimately were taken over by these latter companies. (ii)The shares had been shown under the head "investment" in the assessee's balance-sheet and the resultant loss has been shown as loss on sale of assets in its profit and loss account. (iii)The long period between the purchases and sales of the shares and debentures indicated that these were not acquired for the purpose of the assessee's business as a dealer in shares. (iv)The bulk of the shares held by the assessee were not quoted in the stock exchange and a dealer in shares would not normally deal in such shares. (v)The assessee…

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