Commissioner of Income Tax, Calcutta vs Burrakur Coal Co. Ltd., Calcutta

Sinha, C.J.—This is a Reference u/s 66(2) of the Indian income tax Act, Section 12 of the Excess Profit Tax Act and Section 19 of the Business Profit Tax Act. The Assessee in this case is Burrakur Coal Co. Ltd. (hereinafter referred to as the ''Assessee company''). The assessment year is 194748 corresponding to the previous year ending on June 30, 1946 and the chargeable accounting period for the E.P.T. and B.P.T. assessment are from July 15 1945 to March 31, 1946 and from April 1, 1946 to June 30, 1946 respectively. The Assessee company was carrying on coal mining business since a long time. Sometime in June, 1915, it promoted the Sijua (Jherria) Electric Supply Co. Ltd. along with several other promoters. The purpose of this promotion appears to be that these promoters required electric power supply in their collieries and they jointly subscribed to the shares of this company. By 1919 and 1922, the two other promoters, viz., Reliance Coal Co. Ltd. and Nowaghur Coal Co. Ltd were amalgamated with the Assessee company and the shares of the respective companies were taken over by the Assessee company. In the result, excepting three shares, all the shares, out of 2 lakhs shares issued and subscribed, were held by the Assessee company. Before 1915, the Assessee company was carrying on a fireclay concern, principally for its own consumption, but for the sake of proper management it converted the said fireclay concern into a company called the Kumardhubi Fireclay and Silica Works Ltd. Almost all the shares of this company were held by the Assessee company. Similarly a business of engineering was started by the Assessee company, principally for its colliery business. In July, 1915, this engineering concern was converted into a private company called the Kumardhubi Engineering Works Ltd. Here also, the shares were principally held by the Assessee company. In the accounting year ending July 30, 1946, relevant for the assessment year 1947-48, the Assessee company sold 71,715 shares of the Sijua (Jherria) Electric Supply Co. Ltd. and in the same year, it purchased 49,350 shares of Budroochuck Coal Mining Co. Ltd., the total number of shares issued by the said company being 50,000. This purchase was made from the Standard Trusts Mining Co. Ltd. and as a result of such purchase, the said Budroochuck Goal Mining Co. Ltd., became a subsidiary to the Assessee company. In the year of account relevant for the assessment year 1947-48, as a result of the sale of the shares of Sijua (Jherria) Electric Supply Co. Ltd., there was a profit of Rs. 7,67 357. The Assessee company also sold and redeemed securities which yielded a profit of Rs. 27,955.

The income tax Officer treated both these amounts as trading profits. The income tax Officer held that the sale of Sijua (Jherria) shares was authorised by the memorandum of association of the company and following the decision in Indra Singh and Sons Ltd. Vs. The Commissioner of Income Tax, the sale and purchase of these shares was held to be a normal step in carrying on the business of the Assessee company and/or an act done in what was truly the carrying on of such business. The Assessee contended that the purpose of the sale was to meet the expenses in constructing a ropeway for its collieries, the estimated expenses of which was about Rs. 60 lakhs. For financing the construction, some shares and securities were sold which brought in about 39 lakhs, in addition to which debentures had to be issued to the extent of Rs. 20 lakhs. Regarding the purchase of shares in the Budroochuck Coal Mining Co. Ltd., it was alleged that the Assessee had advanced a large amount of money to the aforesaid colliery company and as the financial condition of the said company was precarious, the Assessee thought it fit to acquire the shares of the said company to protect the advances made to it. Shortly after the said acquisition the Budroochuck Coal Mining Co. Ltd. was dissolved by the order of the Court and its assets were taken over by the Assessee company. It was held that all this was done under powers granted under Clause 3(12) of the memorandum of association, in the result, the income tax Officer held that the sale and purchase of the shares were done in the normal course of carrying on of the business of the Assessee company and were trading profits. On appeal, this view was upheld by the Appellate Assistant Commissioner. From this a further appeal was taken to the Appellate Tribunal. The Appellate Tribunal found that the Assessee company did construct a ropeway in the succeeding years and that the Budroochuck Coal Mining Co. Ltd. was dissolved by the High Court id its assets were incorporated with that of the Assessee company, 1 its opinion, the supply of electric power was a necessity for the business of the company. The Assessee company took advantage of Le co operation of the other two coal companies in constructing the electric supply concern and later on, as the two companies were amalgamated, the shares came into the possession of the Assessee company. The sale of the shares and securities was done in terms of the general special powers contained in the memorandum of association, but it for purposes of an expected trading profit. The acquisition of the shares of the Budroochuck Coal Mining Co. Ltd. was in the interest of the company and was not made with the idea of financing the said company. In the premises, the Appellate Tribunal held that the surplus arising out of the sale of the shares and securities was an accretion to the capital assets of the Assessee company and was not taxable under the income tax Act. Upon this, the following question of law was framed by the High Court:

Whether in the facts and circumstances of the case, the surplus of Rs. 7,67,357 and Rs. 27,955 realised by the Assessee company on the sales of shares and securities were a taxable income arising out of its business.

The way that Mr. Pal, appearing on behalf of the Revenue, has framed his argument is as follows: He first of all refers to the clauses in the memorandum of association of the Assessee company, extracts from which have been set out in pp. 33 to 39 of the paper book. Clause (2) enables the Assessee company to carry on the trade or business of colliery proprietors etc. Clauses (11), (12) and (22) are important and are set out below:

(11) To acquire and undertake the whole or any part of the business, property and liabilities of any person or company, carrying on any business which this company is authorised to carry on, or possessed of property suitable for the purposes of this company and to promote, subscribe to or assist any public or private work or undertaking facilities for or conducive in any way to the purposes or profit of the company and to hold shares or interest in any such company or partnership.

(12) To enter into partnership or into any arrangement for sharing profits, union of interests, co-operation joint adventure, reciprocal concession or otherwise with any person or company carrying on or engaged in or about to carry on or engage in any business or transaction carried on or conducted or capable of being carried on or conducted so as directly or indirectly to affect this company and to lend money to, or guarantee the contracts of, or otherwise assist any such person or company and to take or otherwise acquire shares and securities of any such company and to hold, sell, or otherwise deal with the same

(22) To manage, let, mortgage, sell, underlet, or otherwise turn to account, dispose of, or deal with all or any part of the property of the company, whenever and however acquired.

Next, Mr. Pal relied strongly upon the assessment order of the income tax Officer. The income tax Officer notices that, according to the provisions of Articles 3 to 12 of the objects enumerated in the memorandum, the company could enter into partnership or arrangement etc. with any person or company carrying on or engaged in any business or transaction carried on or conducted or capable of being carried on or conducted, so as to directly or indirectly affect the Assessee company and to take or otherwise acquire shares and securities of any such company and to hold, sell or otherwise deal with the same. He accordingly came to the conclusion that the acquisition of the Sijua (Jherria) shares by the Assessee company as well as their sale were in terms of the memorandum of association. Reference was made to the case of Indra Singh and Sons (Supra), where it has been held that even if a company was not carrying on the business of buying or selling of shares and securities, profits from the sale of shares were taxable where the sale of such shares was a normal step in carrying on the business of the company, or was an act done in what may be truly said to be the carrying on of such business. The I.T.O. held that what the Assessee company was doing was a normal step in the carrying on of its business, inasmuch as it was done in exercise of powers contained in its memorandum of association. The I.T.O. further found that in past and subsequent years the Assessee had sold shares and securities. For all these reasons, he held that the profit of Rs. 7,95,312 from sale of shares and securities was an ordinary trading profit and was taxable. This view was upheld by the Appellate Assistant Commissioner, but rejected by the Appellate Tribunal. It will appear from the statement of the case filed by the Appellate Tribunal that the sale of the Sijua (Jherria) shares, as also the securities were sales of capital assets and that the Assessee did in fact require about Rupees sixty lakhs for constructing a ropeway for its collieries, of which Rs. 39,00,000 included the sale proceeds of the Sijua (Jherria) shares and securities. Even this was not found to be sufficient and debentures for Rs. 20 lakhs had to be floated in subsequent years. Mr. Ginwalla, appearing for the Assessee company, has taken the following stand: He says that the memorandum of association doubtlessly authorises the sale and purchase of the shares and securities with which we are concerned in this case. The principal object of the Assessee company was to purchase or otherwise acquire the business with goodwill of the Burrakur Coal Co. Ltd. and to carry on the same. The other objects in the memorandum were subsidiary objects. The shares in the Sijua (Jherria) Electric Supply Company were purchased because the electric company had been promoted by the Assessee company together with others for the simple reason that a colliery cannot be run without electricity. The shares were capital assets and were held for nearly thirty years or more. When a capital asset is sold, the surplus is a profit of a capital nature. Whether a particular asset is capital asset or not depends on the circumstance under which it was acquired. It is the intention with which the asset was acquired that determines its nature. The mere fact that there was power to sell the shares in the memorandum does not necessarily make it a trading asset, The Appellate Tribunal has held that the sale proceeds were utilised in acquiring a capital asset, namely a ropeway. Therefore, the amounts mentioned in the question must be held to be capital assets and the findings of the Tribunal cannot be said to be perverse or based on no evidence and are, therefore, binding and should not be dissented from.

I shall now deal with certain cases cited by Mr. Pal on behalf of the Revenue. The first case cited is a Scottish case, Californian Copper Syndicate v. Harris 5 T.C. 159. The facts in that case were as follows: The Californian Copper Syndicate was formed with a capital of �30,000, inter alia, to acquire copper and other mines, to prospect and explore for the purpose of obtaining information and to enter into treaties, contracts and engagements with respect to mines, mining rights etc. It was also to carry on mercantile or trading business and to work minerals, to establish and form companies, to subscribe for, purchase or otherwise acquire shares or stock of any company and to hold, sell or dispose of the same etc. The company acquired copper bearing lands in the county of Fresno, at the price of �24,000 and expended the paid-up capital of the company for the purchase and development of the property. After having developed the property, it sold it to the Fresno Copper Co. Ltd. and made a large profit, but received it in the form of shares in the Fresno Company. It was contended that the transaction was nothing but substituting one capital for another or in other words substituting its capital in the form of land, with capital in the form of shares and therefore, it was a growth of capital and not income and was not taxable. Clerk, L.J. said as follows:

It is quite well settled principle in dealing with questions of assessment of income tax, that where the owner of an ordinary investment chooses to realise it and obtains a greater price for it than he originally acquired it at, the enhanced price is not profit in the sense of Schedule D of the income tax Act of 1842 assessable to income tax. But it is equally well established that enhanced values obtained from realisation or conversion of securities may be so assessable, where what is done is not merely a realisation or change of investment, but an act done in what is truly the carrying on, or carrying out, of a business. The simplest case is that of a person or association of persons buying and selling lands or securities speculatively, in order to make gain, dealing in such investments as a business and thereby seeking to make profits. There are many companies which in their very inception are formed for such a purpose and in these cases it is not doubtful that, where they make a gain by a realisation, the gain they make is liable to be assessed for income tax.

What is the line which separates the two classes of cases may be difficult to define and each case must be considered according to its facts; the question to be determined being is the sum of gain that has been made a mere enhancement of value by realising a security, or is it a gain made in an operation of business in carrying out a scheme for profit-making?

It was held that the objects of the company as set out in its memorandum showed that it was organised to do highly speculative business. The mineral field, which it acquired, could never have been intended to be worked with the capital at the disposal of the Assessee. The object of acquisition was to exploit the field and obtain gain by inducing others to take it up on such terms as would bring substantial gain to themselves. This was an essential feature of the business, which was no more than a speculation and secondly, it was a trading venture and it did not matter that instead of the profit being in cash it was in the form of shares. Accordingly, it was held that the profit was taxable.

The next case cited is another English case Griffiths v. J.P. Harrison (1962) A.E.R. 909. That was a case relating to a ''dividend stripping'' transaction. The facts were as follows: A company called Harrisons were in business as merchants. They had made a loss of �13,585. They had no investment income. They got to know of a company called Clairborne dealing in cloth which had made a profit of �28,912-13 s.-6d. It had paid tax on that sum amounting to �13,010-14 Section That left it with a balance of �15,901-19 S.-13 d. which was available for distribution to its shareholders as dividend. It then closed down its business. So, what Harrisons did was first of all to alter their articles, enabling them to deal in the purchase and sale of shares. They then purchased the Clairborne shares, by borrowing from another company. The object was to put themselves in a position in which they could claim repayment of tax, because they could set off their own against the profits and say that they had made no profits at all and thus claim repayment of the whole of the tax paid, from the Revenue authorities. The question was whether this transaction was an adventure in the nature of trade. The majority of the Judges held that it was an adventure in the nature of trade and it did not matter that the object was to compel the Revenue to refund income tax by devious methods. Lord Denning, however, dissented, holding that it was not an adventure in the nature of trade when the object was merely "digging for wealth in the subterranean passages of the Revenue, searching for tax repayments".

The third English case cited by Mr. Pal is a decision of the House of Lords, Frasers (Glasgow) Bank Ltd. v. Commissioner of Inland Revenue 40 T.C. 698. The facts in that case were as follows: The Appellant company carried on a banking business upon a restricted scale. It operated primarily within a group of companies controlled by its own chairman F. It did not utilise the normal clearing house facilities, but operated through a clearing-house bank, N Ltd., which was in fact its bankers. N Ltd., to whom the Appellant owed a sum of �50,000, asked it to reduce its indebtedness. On instructions from F, certain stock was sold and the amount due to N Ltd. was reduced. In course of the sale, about �18,300 was realised as profit. The point was whether this was a capital asset or a trading profit liable to tax. It was held that the stock in question was bought and sold by the company in course of carrying on its trading and therefore, was taxable.

I do not see how any of these English cases help Mr. Pal The test laid down by Lord Justice Clerk in the Californian Copper Syndicate case (Supra) is a well-known one and I think, may be usefully applied to the facts of this case. In that case, it was held that the profit was a gain from the kind of speculative transaction which the Syndicate was intended by its memorandum to carry out. It was not a capital asset, as the mine field was never acquired for the purpose of working it. Indeed, the Syndicate had not the capital to work it. It was one of the kinds of speculative trade that the Syndicate was formed to carry out. The profit, therefore, was not a capital asset but a trading asset. Similarly, in the ''dividend stripping'' case, the decision turned on the facts. The question asked was ''If it is not trade, what it is?'' The majority of the Judges could only answer it in one way, namely, that it was nothing but trade or an adventure in the nature of trade. It was pointed out that profit was not always the only motive for trading transactions. In the third case cited above, it was found as a fact that the stock was sold in order to reduce the overdraft account and that this was done in the usual course of business. Again, the case turned on its own facts, Indian cases cited by Mr. Pal appear to advance his case no further. The first case cited is a decision of the Privy Council (1940) 8 ITR 635 (Privy Council) . In that case, what happened was that the Punjab Cooperative Bank had large investment in securities and during several years the securities were sold and purchased and there was a large amount of profit gained. It was urged that this was a capital asset and therefore, not taxable. The Privy Council held that it was the ordinary business of a bank to sell its holding of shares and other investments in order to meet withdrawals by depositors. This was a normal business transaction and therefore, applying the principle laid down in the Californian Copper Syndicate case (Supra) it was held to be a trading profit, which could be taxed.

The next case cited was a Bench decision of the Patna High Court in DALMIA CEMENT LTD. Vs. COMMISSIONER OF Income Tax BIHAR AND ORISSA., . The facts in that case were as follows: The Assessee was a newly floated company and it was to have factories at a number of places, viz., Karachi, Dandote and Dalmiapuram. While some of the factories were still being constructed and/or were awaiting commencement of work, large sums of money were lying surplus and Rs. 13,00,000 of surplus capital was utilised in investing in shares of a sister concern, namely, the Rohtas Industries Ltd., Dalmianagar. As soon as the money was required these shares were sold and yielded a very large profit. The objects of the company in the memorandum included the acquiring and dealing in shares, stock or securities and to lend surplus money and to invest the same. It was held as a fact that the investment of the surplus money was done as a part of the business in order to make a profit and therefore, it was a trading profit which was taxable. In our opinion these cases do not establish the proposition put forward by Mr. Pal that whenever an Assessee company does an act in conformity with the powers contained in its memorandum, it must be a trading transaction. A case must be decided on its own facts. It is true that in the memorandum of association of the Assessee company, it was permissible to acquire shares in companies, which would be beneficial to its own running and to sell the same. But whether a particular transaction amounted to a trading profit or not must depend on the facts. What has been found here by the Appellate Tribunal and we are bound by that finding, is that a large amount of money was required for the purposes of erecting a ropeway, the erection of which was essential for 1 he carrying on of the business of the company. It was for this purpose that the shares were sold, after holding the same for a period of thirty years. In fact, the sale of shares and securities by themselves was not sufficient and a debenture had to be floated for 20 lakhs. If a company carrying on manufacture erects a new factory, in the absence of special circumstances, it must be considered to be an investment in a capital asset. We do not see why any difference should be made because the company in this case had to erect a ropeway which was an essential factor in the successful carrying on of its business. As Mr. Ginwalla has pointed out, the realisation of a capital asset is primarily to be considered as Conversion of capital asset and unless it was done for the carrying ton of the trade or business of the company, for the purposes of making profit, it cannot be considered as a trading profit. The relevant point of time to be considered is the time when the asset was originally acquired. It is true that, according to the memorandum of association, shares in the companies could be bought which would be of benefit to the carrying on of the business of the Assessee and the same could be resold; but the question is whether the shares in question were purchased in the first instance, with the intention of making a gain by resale, when the same had risen in, value. On the facts of this case, we cannot come to any such conclusion. The shares were purchased because the Assessee company, together with two other allied companies, needed supply of electric powers. The shares had been retained for thirty years. They were only sold to create another capital asset. As was pointed out in a Bench decision of the Allahabad High Court SETH GANGA SAGAR, IN RE., that the intention must be deduced on the facts and circumstances of each case. This point has been made clear in a Bench decision of the Madras High Court in Sri Gajalakshmi Ginning Factory Ltd., Palladam Vs. The Commissioner of Income Tax, Madras, where Rao, J. pointed out that if a person bought a land with a view to sell it in order to bring profit and then sold it at a profit, it would be in the nature of a venture in trade. But if a person buys land with no intention to sell it and after a long interval finds it convenient to sell the land at a profit, it cannot be said that the activity is necessarily in the nature of a trading transaction. In that case, the land was held for ten years and thereafter sold. On the facts it was held that the money was a capital receipt and not taxable. A very near case is a Supreme Court decision Commissioner of income tax Madras v. P.E.N. Co. Ltd. (1965) 58 ITR 55. The facts in that case were as follows: The Respondent company was primarily formed to carry on the business of planters in Malaya and to earn profit by sale of rubber. According to the memorandum the company had a power to sell, to turn into account, to dispose of or to deal with properties and rights of all kinds. Not being able to administer its far-flung business effectively, the company sold certain plots of land at a profit. The question was whether the profits realised by the company could be brought to tax. It was held that the mere existence of the power in the memorandum to sell or dispose of or deal with the properties and rights of all kinds was not decisive on the question. The incidental sale of uneconomical or inconvenient plots of land was not necessarily a trading transaction. It had no connection with the primary object of the company, namely, to earn profit by sale of rubber. Therefore, the profit was not taxable.

Whether a transaction is in the nature of trade or an adventure in the nature of trade depends upon the facts of each case. In another Supreme Court decision in Ramnarain Sons (Pr.) Ltd. Vs. Commissioner of Income Tax, Bombay, Sash, J. said as follows:

In considering whether a transaction is or is not an adventure in the nature of trade, the problem must be approached in the light of the intention of the Assessee having regard to the "legal requirements which are associated with the concept of trade or business"....

What happened in that case was that the Appellant company was a dealer in shares and securities and also carried on business of managing agency of other companies. In order to acquire the managing agency of a textile mill the Appellant company purchased a number of shares at a high price, a transaction in which a huge loss was incurred. This was claimed as a trading loss. It was held that the purchase of shares far in excess of their market price, to facilitate the acquisition of the managing agency of another company, was the acquisition of a capital asset and was not a trading transaction and therefore, the loss could not be treated as a trading loss. In a Bench decision of this High Court, Bhikamchand Bagri, Calcutta Vs. Commissioner of Income Tax (Central), Calcutta, , the position was stated as follows:

The distinction between investment and stock-in-trade, between fixed capital and circulating capital, is well known. In Rees Roturbo Development Syndicate Ltd. v. Ducker (1928) 13 Tax Case 366, Rowlatt J. observed, what is meant by the phrase ''capital asset'' is that this is an asset which represents fixed capital as opposed to circulating capital, that is to say, that this is an article which is possessed by the individual in question, not that he may turn it over and make a profit by the sale of it to his advantage, but that he may keep it and use it and make a profit by its use. Then if an article of that sort is sold at a profit, that profit is not a profit of trade.

Therefore, the whole question depends on the facts of each case. Whether in its accounts the company shows it as capital asset or trading profit is important but not conclusive. What is to be gathered is the intention with which a particular asset was acquired and how the profit was made by its sale. Once it is shown that an asset is a capital asset then even if profit is made by the sale thereof, the profit is not necessarily a trading profit. If it is not a trading profit when the profit was made, how it was spent later on is of no consequence. See Birds Investments Ltd. Vs. Commissioner of Income Tax, . The realisation of fixed capital by turning it no some other form of capital or money, cannot be considered as a trading profit. In a Supreme Court decision, Karanpura Development Co. Ltd. Vs. The Commissioner of Income Tax, West Bengal, , Hidayatullah, J. said as follows:

But whatever ''income'' may include or mean it is, however, clear that it does not include fixed capital or the realizing of fixed capital by turning it to some other form of capital or money. Fixed capital is something which the owner keeps in his possession but turns to profit; circulating capital, however, is turned over in the process of profit-making. It may sometimes happen that in the process of production, fixed capital may be consumed or wasted, but that is a reduction of capital and not an expenditure in the business claimable as an allowance in the reduction of assessable income in the shape of profits of the business.

In the background of these cases let us examine the facts before us. The question is as to circumstances under which the shares in the Sijua (Jherria) Electric Supply Co. Ltd. were purchased and later on sold. The first reference as to the facts is to be found in the assessment order of the income tax Officer at pp. 50-51 of Pt. I of the paper book. There it is stated that, according to the Assessee company, sales were necessitated by the fact that the company had planned a development programme which would require a considerable sum of additional finance, the main expenditure on this account being for a ropeway scheme, the cost of which amounted to Rs. 60 lakhs, as also the purchase of the shares of the Budroochuck Coal Mining Co. Ltd. We further find the fact that these shares were held by the Assessee company since the year 1950. The proposal for installation of a ropeway and the successive advancement of the scheme appears clearly from the Directors'' reports annexed to the supplementary statement of the case and marked as annexures ''D'', ''D1'', ''D3'', ''D4'', ''D5 and ''D8''. These Directors'' reports show that money was required for financing ropeway scheme and that the ropeway had in fact been constructed and was performing satisfactorily. In the balance-sheet the expenditure for the ''Loyabad ropeway'' has been shown as a fixed asset and not as a trading profit. It is necessary here to mention a fact in connection with this reference. This reference came before a Bench presided over by myself and on September 4, 1962, I made an order asking for a supplementary statement of the case, on certain points, particularly as to how the profit relating to the sale of the shares of the Sijua (Jherria) Electric Co. Ltd. could be linked up with the installation of the ropeway. In the supplementary statement of the case, filed by the Appellate Tribunal, dated August 30, 1963, certain facts have been set out, but it is admitted that it was not possible to link up specifically the sale proceeds of the shares and securities with the expenditure incurred only for the ropeway and the acquisition of shares in the Budroochuck Co. It is pointed out that once the funds are merged in the general account, it is impossible to trace a particular expenditure with a particular acquisition of funds.

Mr. Pal has argued that this shows that the Assessee company has not been able to prove that the sums in question have been utilized for the purposes of acquiring a capital asset. Mr. Ginwalla has, however, pointed out rightly that it is for the Revenue to establish that a particular income was liable to tax Commissioner of Income Tax, Madras Vs. Chari and Chari Ltd., . Taking all the materials placed before us, it appears to me as follows: (i) That in 1950 the Assessee company, together with two other promoters, prompted the Sijua (Jherria) Electric Supply Co. Ltd. The object was to facilitate their supply of electric power in their respective collieries. The acquisition was in terms of the power contained in the memorandum of association, but it was an acquisition of a capital asset and there was no intention of trading with the same for profit, (ii) That the shares were held for long 30 years, (iii) That the shares were disposed of only because it was necessary to construct the Loyabad ropeway which cost the company approximately a sum of Rs. 60 lakhs. Rs. 39 lakhs were obtained by conversion of fixed assets including the Sijua (Jherria) shares and debentures were raised for a large sum. This Loyabad ropeway has, in fact, been constructed and is working satisfactorily and is a ''capital'' or ''fixed'' asset of the Assessee company and has been treated as such in the balance-sheet and in the Directors'' reports, (iv) The Assessee company never intended to trade in the shares for the purposes of making a trading profit, (v) That the Budroochuck shares were in fact purchased, for preventing loss and the assets now form a part of the capital assets of the Assessee company.

For the reasons aforesaid in our opinion the Appellate Tribunal had come to the right conclusion and the question that has been asked should be answered in the negative, as given below:

Question Answer

Whether on the facts and in the circumstances of the case, the surplus of Rs. 7,67,357 and Rs. 27,955 realised by the Assessee company on the sales of shares and securities were taxable income arising out of its business? No.

In the facts and circumstances there will be no order as to costs.

Masud, J.

I agree.