Commissioner of Income Tax (Central), Calcutta vs Gobindlal Bangur

K.C. Sen, J.—In this Reference u/s 66(1) of the Income tax Act, 1922, the Commissioner of income tax is the Applicant. The facts are briefly as follows:

The Assessee is a partner of firm Messrs. Mugneeram Bangur and Company who are the reputed dealers in shares. During the accounting year relevant for the assessment year the Assessee sold the following shares:

(i) 750 shares of Lansdowne Jute Mills at Rs. 210 (Rupees two hundred and ten) per share on January 16, 1951, for Rs. 1,57,500 (Rupees one lakh fifty seven thousand and five hundred).

(ii) 550 shares of Bangur Brothers at Rs. 109 (Rupees one hundred and nine) per share on January 16, 1951, for Rs. 59.950 (Rupees fifty nine thousand and nine hundred and fifty).

(iii) 171 shares of Hoolungooree Tea Co. at Rs. 373 (Rupees three hundred and seventy three) per share on January 24, 1951, for Rs. 63,783 (Rupees sixty three thousand and seven hundred and eighty three.

The sales yielded a surplus of Rs. 80,823 (Rupees eighty thousand and eight hundred and twenty three. The Income tax Officer treated this surplus as profit in share dealing business. In appeal the Appellate Assistant Commissioner held that the profit of Rs. 48,000 (Rupees forty eight thousand) arising from sale of Lansdowne Jute Mills shares was assessable as business income and that the balance of Rs. 32,823 (Rupees thirty two thousand and eight hundred and twentythree)(profit of Rs. 4,950 and Rs. 27,873 arising from sales of Bangur Brothers shares and Hoolungooree Tea Co. shares respectively) was exempted as capital receipts and therefore, excluded the latter amount from assessment.

The matter was taken up in second appeal before the Appellate Tribunal. The Tribunal considered the matter in issue in the light of its previous order in the Assessee''s appeal for the same assessment year 1952-53 (I.T.A. No. 801 of 1958-59). In that case, the Tribunal laid down certain tests for deciding the controversy, namely, whether the surplus arising out of a given transaction in shares was on capital account or on business account. The Tribunal held that one of the tests to be applied is the period for which the shares were held by the Assessee. Having regard to the facts and the limited nature of the issues before the Tribunal, it saw no reason to hold that the view taken by the Appellate Assistant Commissioner was so perverse as to require an interference by it.

In this Reference we are called upon to find whether the profit said to have arisen by sale of shares of Hoolungooree Tea Co. Ltd., is on capital account or it should be treated as a trading profit.

On the above facts the following question of law has been raised for this Court''s opinion:

Whether on the facts and in the circumstances of the case the surplus amount to Rs. 27,873 realised on the sale of shares of Hoolugooree Tea Co. Ltd., was a trading profit or a capital accretion.

Mr. Balai Pal, learned Counsel for the Applicant, has contended that the transaction really wears a badge of trade which was overlooked by the Tribunal. It has refused to interfere with the order of the Appellate Assistant Commissioner on its Ending that the view taken by the Appellate Assistant Commissioner was not so perverse as to require interference. It has not, according to Mr. Pal, given any reason of its own beyond dittoing what the Appellate Assistant Commissioner took to be decisive features in the case. It is understood that the Appellate Assistant Commissioner based his decision only on the ground of long gap between the date of purchase and sale of shares. The Appellate Assistant Commissioner did not take any other feature into consideration in respect of the third group of shares mentioned before. If he had taken the reasons which weighed with him in negative the Assessee''s case with regard to Lansdowne Jute Mill shares, he could have no occasion for resting his judgment on the point of gap only.

On account of the aforesaid argument being advanced, it is necessary for us to see what finding was arrived at by the Appellate Assistant Commissioner regarding the Jute Mill shares and whether this aspect of the case was taken into consideration by the Appellate Tribunal. On a perusal of the order of the Appellate Assistant Com missioner it appears that he had in his mind three principal aspects as to why the transactions regarding the Lansdowne Jute Mill shares bore the badge of trade and consequently the income which was derived from such share dealings was assessable to tax. They are as follows:

(i) 750 shares were sold within six months from the date of purchase.

(ii) The Assessee was not interested as a promoter or in any other identical capacity with respect to these shares.

(iii) The yield of dividend amounting to Rs. 15,710 (Rupees fifteen thousand and seven hundred and ten) in the year of account could not in any way be said to be unsatisfactory.

(iv) There was no immediate or compelling necessity for selling the Lansdowne Mill shares.

In dealing with the shares of Messrs. Hoolungooree Tea Co. Ltd., it was observed by the Appellate Assistant Commissioner that they were purchased on November 18, 1942 and sold in 1951, that is, more than eight years after the date of purchase. As the gap between the purchase and sale of shares was very large, the transaction did not smack of dealing in shares.

In appeal the Tribunal has observed that it set out certain facts in the case I.T.A. 801 of 1958-59 at length and accordingly, it did not find any necessity for repeating the same in the appeal preferred by the income tax Officer before it. It took into consideration these facts and after considering the instant case, it thought that the Assessee was an investor in respect of the share transaction of the Hoolungooree Tea Co. Ltd. Having regard to these facts and the limited nature of the issue before it, the Tribunal was unable to say that the view taken by the Appellate Assistant Commissioner was so perverse as to require its interference. Accordingly, the department''s contention was negatived.

On the above, a simple question arises whether the Tribunal''s finding is erroneous in law on the ground that it was arrived at without consideration of the pros and cons of all the materials and on insufficient evidence. From the order of the Tribunal it appears that it took into consideration the entire reasons of the Appellate Assistant Commissioner, inclusive of the reasons with regard to the Lansdowne Jute Mill shares which were thought sufficient for negativing the Assessee''s case and finally was of the opinion that the gap in the transaction of the shares would warrant the conclusion that it could not be referable to share dealings for the purpose of assessment of tax. Even assuming that the Tribunal has come to its conclusion on an insufficient evidence, namely, gap in the transaction only, this Court cannot set aside the Tribunal''s finding of fact as there is some evidence to support it, although it might have come to an entirely different conclusion upon the evidence in record.

In this connection Mr. Meyer, learned Counsel appearing for the Respondent, has referred us to an observation of the Supreme Court in the case of The Commissioner of Income Tax, Bombay City II, Bombay Vs. Jadavji Narsidas and Co., (46). Their Lordships have observed as follows:

The question, then, is whether there was evidence to justify the Tribunal''s finding that the transactions with Damji Laxmidas were not the transactions of the Assessee firm. In such an enquiry the Court looks not to the sufficiency of the evidence but whether any evidence exists at all. Even if there be slight evidence which was believed by the Tribunal and on which the conclusion can be rested, such question must be answered in the affirmative. But the finding must not proceed upon conjecture, suspicion or surmise. If there is not a scintilla of evidence, the finding cannot be sustained because the proved facts would not then support the inference.

We think that this observation sets at rest all the controversies as raised by Mr. Pal for the Applicant and we have no reason to differ from the Tribunal even if it proceeded on the sole evidence as to gap between the dates of purchase and sale as the criterion for characterising the transaction as not appertaining to share dealings.

Lastly, in this connection the observation of this Court (Chakravartti and Das Gupta, JJ.) in the case of RADHA DEBI JALAN AND OTHERS Vs. COMMISSIONER OF Income Tax, CALCUTTA., be referred to. Their Lordships observed, inter alia, as follows:

If the High Court could hold that there was evidence before the Tribunal on which it could properly take the view that the profits had been derived from an adventure in the nature of trade, it would not be entitled to say that the Tribunal was wrong although there might be other evidence pointing to the opposite conclusion. The evidence, however, in order that it may support the finding, must be evidence covering all the essential points. If all such points are covered, the quality or sufficiency of such evidence is not a matter for the High Court.

At p. 186 it has also been observed, although on a different set of facts that "the fact that the shares were held on for five years does not, to say least, point to trading". In this particular case also it appears as pointed out before that the Tribunal laid great stress upon the fact that there was an inordinate gap between the date of purchase and the date of sale of the shares. We have already shown that the Tribunal considered all the materials placed before it and in addition considered the gap theory as a very important matter for a finding against the department. Accordingly, this Court cannot in terms of the decision stated above, interfere.

On the above considerations it is needless to enter into any academic discussion on the final report of the Radcliff Commission referred to us by Mr. Pal, wherein at p. 23, it has been discussed as to what constitute badges of trade.

In the above premises, the answer to the question is that the surplus amounting to Rs. 27,873 (Rupees twenty seven thousand and eight hundred and seventy three) realised on the sale of shares of Hoolungooree Tea Co. Ltd., was a capital accretion.

The Applicant will pay costs to the Respondent.

Sankar Prasad Mitra, J.

I agree.