Appeal No 1119NT of 1975
From the Judgment and Order dated 16121974 of the Calcutta High Court in IT Reference No 256 of 1974
SC Manchanda Ms A Subhashini and KC Dua for the Appellant
Dr D Pal Ms M Seal Ms Mridula Ray and HK Dutt for the Respondents
The Judgment of the Court was delivered by KANIA J
This is an appeal filed by the Commissioner of 641 Income tax Calcutta by Special Leave against an order of a Division Bench of the Calcutta High Court declining to direct the Income tax Appellate Tribunal hereinafter re ferred to as the Tribunal to refer to the Court for determination of certain questions raised by the Commission er of Income tax
It is necessary to set out a few facts for the apprecia tion of the controversy in this appeal
In its agreement for the Assessment Year 1959 60 the respondent assessee claimed deductions inter alia in respect of the loss of the sale of certain shares of Bharat Starch  Chemicals Ltd and Greaves Cotton  Co Ltd for the relevant previous year
The re spondent assessee had sold in the relevant previous year 2500 shares of Bharat Starch  Chemicals Ltd to Ms KC Thapar  Sons Ltd a company belonging to the same group
These shares were purchased on 22nd February 1958 and were sold on 31st March 1959
The loss claimed was of Rs26465
The Income tax Officer concerned disallowed this case on the ground that the sale price was shown at Rs250 per share whereas the market quotation on 31st March 1959 was Rs806 per share
The Income tax Officer also relied upon the circumstances that the shares had been sold to a company which was an allied concern of the assessee that is be longing to the Thapar group
The Income tax Officer took the view that the sale had been affected only to enable the assessee to claim the loss and could not be allowed as genuine
The respondent assessee had also sold 3000 shares of Greaves Cotton  Co Ltd on 4th February 1959 to Ms KC Thapar  Sons Ltd and claimed a loss of Rs4787855p on this transaction
The Income tax Officer held that these shares had also been sold to a company belonging to the Thapar group and under the control of that group
The In come tax Officer took the view that the motive for selling the aforesaid shares and some other shares was to make losses and set them off against the profits and these transactions could not be considered to be in the normal course of business
He held that this type of trans action could not be regarded as genuine and disallowed the claim
The assessee preferred an appeal to the Appellate As sistant Commissioner against the order of the Income tax Officer
In respect of the sale of the shares of Bharat Starch  Chemicals Ltd the Appellate Assistant Commissioner accepted that the market quotation of these shares at Rs806 on 31st March 1959 was a nominal quotation 642 and there was no transaction in these shares at that rate because there was no buyer at that price and that the In come tax Officer was wrong in relying upon this circumstance to come to the conclusion that the transaction of sale of these shares was not genuine
He also took the view that the Income tax Officer was in error when he took the view be cause these shares had changed hands between companies controlled by the same group that fact vitiated the sale
He however took the view that the disallowance was correct as the shares were in fact purchased at Rs250 per share and sold at the same rate that is he disagreed with the average cost worked out by the assessee and pointed out that the basis on which such average cost was worked out had not been shown to him
He further took the view that the 25000 shares of this company sold by the assessee constituted a large block and was connected with the acquiring of control over the Bharat Starch  Chemicals Limited and hence the loss should be regarded as an investment loss and not a business loss
As far as the loss on the sale of shares of Greaves Cotton  Co Ltd was concerned after referring to the ground on which the Income tax Officer had disallowed this loss the Appellate Commissioner took the view that the holding of these shares could be reasonably attributed to the invest ment portfolio and hence the said loss was a capital loss and not a business loss or a revenue loss
He further re ferred to the fact that the shares of this company namely Greaves Cotton  Co Ltd were not quoted in the stock exchange market
On the basis of these circumstances he disallowed the loss
The assessee went in further appeal to the Tribunal
The Tribunal relied upon the fact that in the earlier years the profits made by the assessee on the sale of shares had been treated as business income and this would show that the assessee in the earlier years had been regarded as a dealer in shares
The Tribunal rightly observed that under these circumstances there was no reason why the assessee should not be treated as a dealer in shares in the relevant previ ous year either
The Tribunal also pointed out that nothing was shown on the record which would suggest that the acqui sition and purchase of these shares was for anything other than normal commercial purposes or that the sales were not made in the ordinary course of business
The Tribunal held that the mere fact that the shares have been sold to a company belonging to the same group and under the same control would not be conclusive to show that the transac tions were bogus or 643 not in the normal course of business or were for an extra commercial consideration
It was pointed out to the Tribunal by the Departmental Representative concerned that these shares were shown by the assessee as investments in the balance sheet
The Tribunal pointed out that this circum stance would not necessarily lead to a conclusion that the shares were held in the investment portfolio and not as stock in trade and in this connection the Tribunal placed reliance on the decision of this Court in Karam Chand Thapar and Bros P Ltd vs Commissioner of Income tax Central Calcutta wherein it was held that the circumstances that the assessee had shown certain shares as investment shares in its books of account as well as its balance sheet was by itself not a conclusive circumstance indicating that the shares were held on investment account or capital account but it was a relevant circumstance on which the Tribunal could rely for drawing an inference that the loss on the sale of the said shares was a capital loss
It may be noted that this decision shows that although the manner in which shares are shown in the balance sheet or books of account of the assessee is relevant it is not a conclusive factor in determining whether the shares were held as an investment or as stock in trade
However the view taken by this Court in that case was that the loss was a capital loss as the sale of the shares was made after a long period of over ten years
In the case before us howev er the shares have been sold within a much shorter period which would suggest although by no means conclusively that the sales were in the nature of a business transaction
The Tribunal also pointed out that the circumstances that the transactions were between companies in which Thapar group had a controlling interest and also in respect of shares of companies belonging to the same group by themselves would not support the conclusion that the transactions were stage managed although it might arouse suspicion and call for a closer scrutiny
In respect of both the said lots of shares the Tribunal pointed out that there was nothing to show that the purchase of these shares had anything to do with the control of the companies concerned
The Tribunal relied upon the circumstances that the sales were at the market rates or going rates and hence there was no question of making a bogus loss
On the basis of these conclusions the Tribunal held that the losses in respect of the sales of shares of Bharat Starch  Chemicals Ltd as well as of Greaves Cotton  Co Ltd were liable to be allowed as business losses
From this decision of the Tribunal the Commissioner of Income 644 tax applied to the Tribunal for referring certain questions for the determination of the High Court
The Tribunal passed an order referring one question to the Court for determina tion but declined to refer the other questions on the ground that the decision of the Tribunal was arrived at purely on the appreciation of the facts brought out in evidence and that these questions in respect of which the Commissioner wanted a reference were not questions of law which deserved to be referred to the court for determination
From this decision of the Tribunal the Commissioner applied to the High Court for directing the Tribunal to refer the said questions also to the Court for determination
The High Court by its impugned judgment rejected the said applica tion
The present appeal is directed against the said deci sion of the High Court
When the appeal reached hearing before us Mr Manchan da learned counsel for the Commissioner stated that he pressed the appeal only in respect of two questions which are as follows 1
Whether on the facts and in the circumstances of the case the Tribunal had any evidence and had not relied on irrelevant or partly irrelevant materials in holding that the transactions entered into by the assessee in
the purchase and sale of shares of Bharat Starch  Chemicals Ltd and Greaves Cotton  Co Ltd were genuine commercial transactions and whether such finding was not otherwise unreasonable or perverse 2
Without prejudice to Question No 1 whether on the facts and in the circum stances of the case the Tribunal s finding that the assessee entered into the transac tions of purchase and sale of 25000 shares of Bharat Starch  Chemicals Ltd and 3000 shares of Greaves Cotton  Co Ltd in the course of its business as a dealer in shares was based on no evidence or was otherwise unreasonable or perverse In deciding the question whether the Tribunal should have referred the aforesaid two questions to the court for determination there are certain well settled principles which have to be borne in mind
In Commissioner of Income tax Bihar and Orissa vs Dalmia Jain  Co 645 Ltd this Court held that whether a particular loss is a trading loss or a capital loss is primarily a question of fact
Where the Tribunal has come to the conclusion that the loss incurred by the assessee in the sale of the shares held by it was a trading loss and it is not the case of the Department that in arriving at its decision the Tribunal had taken into consideration any irrelevant material or failed to take into consideration any relevant material there is no room for interference by the court
It is well settled that the Tribunal is the final fact finding body
The questions whether a particular loss is a trading loss or a capital loss and whether the loss is genuine or bogus are primarily questions which have to be determined on the appreciation of facts
The findings of the Tribunal on these questions are not liable to be interfered with unless the Tribunal has taken into consideration any irrelevant material or has failed to take into consideration any relevant material or the conclusions arrived at by the Tribunal is perverse in the sense that no reasonable person on the basis of facts before the Tribunal could have come to the conclusion to which the Tribunal has come
It is equally settled that the decision of the Tribunal has not to be scrutinised sentence by sentence merely to find out whether all facts have been set out in detail by the Tribunal or whether some incidental fact which appears on record has not been noticed by the Tribunal in its judgment
If the court on a fair reading of the judgment of the Tribunal finds that it has taken into account all relevant material and has not taken into account any irrelevant material in basing its conclusions the decision of the Tribunal is not liable to be interfered with unless of course the conclusions arrived at by the Tribunal are perverse
Keeping these principles in mind in the present case we find that the Tribunal has taken note of all the relevant circumstances which appear on record and which were referred to by the Departmental Representatives before the Tribunal
It has been taken into account any material which could be said to be irrelevant in arriving at its conclusions
In considering whether the shares of Bharat Starch  Chemicals Ltd and Greaves Cotton  Co Ltd were held by the assessee as stock in trade or as capital the Tribunal has taken into account the fact that the assessee was earlier treated by the Department as a dealer in shares as pointed out by Mr Manchanda but that circumstance cannot be regarded as irrelevant in view of the decision to which we have already referred
It is also not possible to say that the decision of the Tribunal is perverse
Mr Manchanda strongly contend ed before us that the Tribunal has nowhere stated in terms that it 646 has taken into consideration the totality of circumstances or the cumulative effect of the circumstances pointed out to the Tribunal and hence the matter should be remanded to the Tribunal
In our view there is no substance in this submis sion
It is true that the Tribunal has not stated in terms that it has considered the cumulative effect of the circum stances pointed out to the Tribunal but on the other hand a plain reading of the judgment of the Tribunal makes it clear that the Tribunal has in fact taken into account the cumulative effect of the circumstances on record before the Tribunal
It is not necessary for the Tribunal to state in its judgment specifically or in express words that it was taken into account the cumulative effect of the circum stances or has considered the totality of facts as if that were a magic formula if the judgment of the Tribunal shows that it has in fact done so there is no reason to inter fere with the decision of the Tribunal
In our opinion there is no merit in this appeal and it must fail
In the result the appeal fails and is dismissed with costs
GN Appeal dismissed


Summary:
The appellant contractor undertook construction of certain timebound projects
The work however could not be completed within the scheduled time due to various reasons
The contract was consequently cancelled at appellant s risk
The disputes arising therefrom between the parties were referred to the arbitrator named in the agreement
He made three awards allowing claim Nos 1e 2 5 7a 7b 7c 13 14 and 15 preferred by the appellant aggregating to Rs3115 lakhs under the several heads mentioned therein
Upon these awards an application was made before the court for passing decrees in terms thereof
Objections were also filed
The trial court took the view that it could not adjudi cate upon the justification for the conclusions arrived at by the arbitrator unless such awards were the result of corruption fraud or there were errors apparent on the face of the award that it was not necessary for the arbitrator to give reasons for his award that there was no jurisdic tion to investigate into the merits of the case and to examine the documentary and oral evidence for the purpose of finding out whether or not the arbitrator had committed an error of law or fact that the arbitrator had not incorpo rated in the award any materials for his conclusion nor did he incorporate the terms of the contract between the par ties
Under such circumstances the award could not be set aside especially when there was no error apparent on the face of it and there was nothing to show that the arbitrator had misconducted the proceedings or that the award had been improperly procured
In appeal before the High Court it was contended for the respon 666 dents that there were errors apparent on the face of the award that the arbitrator had misconducted himself and travelled beyond the terms of the contract and that the claims allowed were beyond and contrary to the agreement between the parties whereas for the appellants it was contended that the award was a non speaking award and therefore it was not open to the court to go into the correctness or reasonableness of the award
The High Court set out the claims noted the rival contentious and referred to the various clauses and the conditions of the contract though the contract itself was made no part of the award and concluded that there were errors apparent on the face of the award that the arbitrator had misconducted himself and travelled beyond his power
In the appeals by special leave it was contended that the High Court had exceeded its jurisdiction in acting in the manner it did on the aforesaid aspects
Allowing the appeals by special leave HELD 11 The High Court fell into an error in deciding the question on interpretation of the contract
It had no jurisdiction to examine the different items awarded clause by clause by the arbitrator and to hold that under the contract these were not sustainable in the facts found by the arbitrator
688DE 12 Once there is no dispute as to the contract what is the interpretation of that contract is a matter for the arbitrator and on which the court cannot substitute its own decision
So also the court cannot substitute the decision of the arbitrator as to what was meant by the contract once a dispute under the contract is conceded to the arbi trator
687BD 13 In the instant case the court had examined the different claims not to find out whether these claims were within the disputes referable to the arbitrator but to find out whether in arriving at the decision the arbitrator had acted correctly or incorrectly
This the court had no juris diction to do namely substitution of its own evaluation of the conclusion of law or fact to come to the conclusion that the arbitrator had acted contrary to the bargain between the parties
Whether a particular amount was liable to be paid or damages liable to be sustained was a decision within the competency of the arbitrator
By purporting to construe the contract the court could not take upon itself 667 the burden of saying that this was contrary to the contract and as such beyond jurisdiction
686D F 14 Furthermore if on a view taken of a contract the decision of the arbitrator on certain amounts awarded is a possible view though perhaps not the only correct view the award cannot be examined by the court in the manner done by the High Court in the instant case
688D FR Absalom Ltd vs Great Western London Garden Village Society Ltd  Heyman  Anr
vs Darwins Ltd and Attorney General for Manito ba vs Kelly  Ors distinguished
State of Kerala vs Poulose and State of Kerala vs Raveendranathan partly over ruled
21 Where there are errors apparent on the face of the award it can only be set aside if in the award there is any proposition of law which is apparent on the face of the award namely in the award itself or any document incorpo rated in the award
But where a specific question is re ferred the award is not liable to be set aside on the ground of an error on the face of the award even if the answer to the question involves an erroneous decision on a point of law
684D E Champsey Bhara  Co vs Jivraj Balloo Spinning  Weaving Co Ltd L 1922 1A 324 Ms Alopi Parshad  Sons Ltd vs The Union of India  Jivarajbhai Ujamshi Sheth  Ors
vs Chintamanrao Balaji  Ors  and Upper Ganges Valley Electricity Supply Co Ltd vs UP Electricity Board
  referred to
22 An award can also be set aside if the arbitrator had misconducted himself or the proceedings
One of the miscon ducts could be the decision by the arbitrator on a matter which is not included in the agreement or reference
But in such a case one has to determine the distinction between an error within the jurisdiction and an error in excess of the jurisdiction
686C Anisminic Ltd vs Foreign Compensation Commission   Regina vs Noseda Field Knight  Fitzpat rick and Halsoury s Laws of England 4th Edn
para 622 referred tO 668 23 An award may be remitted or set aside on the ground that the arbitrator in making it had exceeded his jurisdic tion and evidence of matters not appearing on the face of it will be admitted in order to establish whether the jurisdic tion had been exceeded or not be because the nature of the dispute is something which has to be determined outside the award whatever might be said about it in the award or by the arbitrator
685H 686A B Christopher Brown Ltd vs Genossenschaft Oesterreigh ischer etc
  Dalmia Dairy Industries Ltd vs National Bank of Pakistan and Russell on The Law of Arbitration 20th Edn
427 referred to
24 An arbitrator acting beyond his jurisdiction howev er is a different ground from the error apparent of the face of the award
In the former case the court can look into the arbitration agreement but in the latter it cannot unless the agreement was incorporated or recited in the award
In the instant case the contract in question was not incorporated or referred to in the award
686B C 25 However there is a distinction between disputes as to the jurisdiction of the arbitrator and the disputes as to in what way that jurisdiction should be exercised There may be a conflict as to the power of the arbitrator to grant a particular remedy
The nature of the dispute has to be determined
686F G Commercial Arbitration by Sir MJ Mustill  Steward G Soyd page 84 referred to
31 The court look into the reasoning only in a speak ing award
It is not open to the court to probe the mental process of the arbitrator and speculate where no reasons are given by the arbitrator as to what impelled the arbi trator to arrive at his conclusion
683G H 32 Furthermore in any event reasonableness of the reasons given by the arbitrator cannot be challenged
Appraisement of evidence by the arbitrator is never a matter which the court questions and considers
If the parties have selected their own forum the deciding forum must be conced ed the power of appraisement of the evidence
The arbitrator is the sole judge of the quality as well as the quantity of evidence and it will not be for the court to take upon itself the task of being a judge on the evidence before the arbitrator
684B C 669 33 In the instant case the award was not a speaking award
The arbitrator had merely set out the claims and given the history of the claims and then awarded certain amount
He had not spoken his mind indicating why he had done what he had done he had narrated only how he came to make the award
In the absence of any reasons for making the award it was not open to the court to interfere with the award
684A B Hindustan Steel Works Construction Ltd vs C Rajasek har Rao 1987 4 SCC 93 and Municipal Corporation of Delhi vs Ms Jagan Nath Ashok Kumar  Anr  referred to