ADDL. COMMISSIONER OF INCOME TAX vs RAJASTHAN COOPERATIVE BANK LTD.

By the Court - The Addl. CIT, Rajasthan, Jaipur has moved these applications u/s. 256(2) of the IT Act, 1961 (hereinafter referred to as the Act) for directing the ITAT, Jaipur to state the case and refer to this court for opinion the following question of law arising out of its consolidated order dt. 6-5-1972 passed in IT Appeals Nos. 1886, 1887, 1888 and 4499 of 1970-71 for the asst. yrs. 1962-63, 1963-64, 1964-65 and 1965-66 :

"Whether, the Tribunal had any material to come to the conclusion that the assessee was holding the securities as its stock-in-trade ?"

The Addl. CIT had first moved an application before the Tribunal u/s. 256(1) of the Act requiring the Tribunal to refer the following question :

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the securities were held by the assessee as stock-in-trade and the same were exempt from tax ?"

According to the Tribunal, the question proposed by the Addl. CIT really comprised of the following two questions :

"1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the securities were held by the assessee as its stock-in-trade.

Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the income from such securities was exempt from tax ?"

The Tribunal by its order dt. 9-10-1972, held that the first part of the question referred to above, namely, whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the securities were held by the assessee as its stock-in-trade could not be referred for the opinion of his court for the reason that the finding of the Tribunal that the securities that were held by the assessee as part of its stock-in-trade and not by way of investment of its surplus funds, was a finding of facts which was based on the various facts relating to the deposits, cash and bank balances and other fluid resources of the assessee and no question of law can be said to arise out of the said to arise out of the said finding. The Tribunal however, referred the question arising out of the second part of the question arising out of the second part of the question referred to above. Feeling aggrieved by the order of the Tribunal refusing to make a reference in respect of first part of the question above referred, the Addl. CIT has filed this application.

We have heard Shri R. N. Surolia, the ld. counsel for the department and Shri S. M. Mehta, the ld. counsel for the assessee and we have also carefully perused the order passed by the AAC and the Tribunal in the appeals filed the assessee. In our opinion the Tribunal was justified in holding that the finding recoded by the Tribunal that the securities were held by the assessee as part of its stock-in-trade and not by way of investment of its surplus funds, is finding of fact which is based on the various factors relating to the deposits, cash and bank balances and other fluid resources of the assessee and no question of law can be said to arise out of the said finding. In this context we may refer to the decision of Supreme Court in Commissioner of Income Tax (Central), Calcutta Vs. Associated Industrial Development Co. (P.) Ltd., wherein it has been held that the question as to whether a particular holding of shares is by way of investment or forms part of stock-in-trade of the assessee is a question of fact. In the circumstances, it must be held that the question as framed in the application cannot be regarded a question of law which arises out of the order of the Tribunal dt. 6-5-1972. The applications filed by the applicants are, therefore, dismissed.