Case: Star Company Limited Vs. Commissioner Of Income Tax (Central) Calcutta

is noteworthy that the question which was, referred is couched in general terms and was not limited to or circumscribed by the reasons which had been given by the Tribunal against the assessee. The question of law on which reference can be made must arise out of the order of the Tribunal. The order which was made in the present case was in favour of the department and against the assessee. It is true that certain reasons which had appealed to the Income-tax Officer and the Appellate Assistant Commissioner were not accepted by the Appellate Tribunal but it had come to the following conclusion which was material for the disposal of the appeal:"We accordingly uphold the view taken by the authorities below that the loss of Rs. 1,11,818 incurred on the sale of 1575 preference shares of Fort William Jute Co., Ltd. was not a loss that arose in course of the appellants business in share dealing though for different reasons."The question which was referred was framed in the light of the final conclusion and in our judgment it was not necessary for the department to apply for and obtain a reference on a question arising from the reasons given by the Tribunal in support of its conclusion in favour of the department.7. It has next been contended on behalf of the appellant that where a question is one of mixed facts and law the facts as found by the Tribunal must be accepted as correct. The Tribunal had negatived the finding of the Income-tax Officer and the Appellate Assistant Commissioner that the preference shares had been acquired by the assessee as a pawn in the scheme of transfer of the managing agency of Fort William Jute Co. Ltd. It was, therefore, not open to the High Court to come to the same conclusion by not treating the finding of the Appellate Tribunal as final. Our attention has been invited to the observations in Commissioner of Income-tax, Bombay City I v. Greaves and Co., Ltd., (1968) 68 ITR 200 (SC), that it is not open to the High Court in a reference under Section 66 (1) of the Income-tax Act 1922 to embark upon a re-appraisal of the evidence and to arrive at findings of fact contrary to those of the Tribunal. The finding of fact will be defective in law if there is no evidence to support it or if the finding is unreasonable or perverse, but it is not open to a party to challenge such a finding unless reference has been made of a specific question concerning that finding. In Oriental Investment Co., P. Ltd. Commissioner of Income-tax, 72 ITR 408 =(AIR 1969 SC 460 ) it has been reiterated that in dealing with findings on questions of mixed law and fact, the High Court must accept the findings of the Tribunal on the primary question of fact as final although it is open to the High Court to examine whether the tribunal had applied the relevant legal principles correctly. It is argued that the High Court has not characterised the aforesaid finding of the Appellate Tribunal as perverse or arbitrary and once that finding is accepted, there would be no justification for holding that the assessee had been made a pawn in the matter of the scheme of transfer of the managing agency of Fort William Jute Co., Ltd., by Mugneeram Bangur and Co., or Bangur Brothers Ltd. In any case there were several facts which showed that the assessee was not privy or party to the aforesaid scheme. It did not acquire any interest in the managing agency nor was it a subsidiary or associate of Mugneeram Bangur group of concerns. The assessee was connected with the Bangurs only to the extent that out of its four Directors two of the Directors were Bangurs.8. In our opinion even if the conclusion of the High Court on the point mentioned above is not taken into consideration the question which was referred had to be answered against the assessee. On admitted and proved facts there can be no manner of doubt that the assessee did not acquire the preference shares in the ordinary course of business. These facts may be restated as follows:(1) The market rate of the preference shares remained constant at the figure of Rs. 119 between April 16, 1952 and May 21, 1952.(2) On May 21, 1952 the agreement between Mugneeram Bangur and Kettlewell Bullen and Co. was entered into for purchasing the entire holding of the managing agency company in the managed company.(3) On May 22, 1952, 1620 shares were acquired by the assessee from Mugneeram Bangur and Co., at the rate of Rs. 186 per share. 50 more shares were acquired on May 27, 1952 at Rs. 184 per shar. The shares were obviously acquired at a price which was very much higher than the market price which prevailed only a day before they were purchased by the assessee.(4) Out of 1670 shares taken over by the assessee from Mugneeram Bangur and Co. 1575 were sold back to the same company at the rate of Rs. 115 per share.(5) The profit and loss account for the assessment year 1954-55 showed that the dealings in other shares were of comparatively much lesser value than the shares in question. The profits and losses which had been made and incurred on account of the other shares were also comparatively of minimal nature.(6) The shares of Fort William Jute Co. Ltd., were purchased by the assessee by obtaining an overdraft from a Bank.9. All the above facts ad circumstances which have some extraordinary features lead to the irresistible conclusion that whatever the motives which entered into the acquisition of the shares, they were certainly not bought and sold in ordinary course of business of the assessee as a dealer in shares. The answer to the question must, therefore, be in the negative and against the assessee and it was rightly so returned by the High Court.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]It is noteworthy that the question which was, referred is couched in general terms and was not limited to or circumscribed by the reasons which had been given by the Tribunal against the assessee. The question of law on which reference can be made must arise out of the order of the Tribunal. The order which was made in the present case was in favour of the department and against the assessee. It is true that certain reasons which had appealed to the Income-tax Officer and the Appellate Assistant Commissioner were not accepted by the Appellate Tribunal but it had come to the following conclusion which was material for the disposal of theIn our opinion even if the conclusion of the High Court on the point mentioned above is not taken into consideration the question which was referred had to be answered against the assessee. On admitted and proved facts there can be no manner of doubt that the assessee did not acquire the preference shares in the ordinary course of business.All the above facts ad circumstances which have some extraordinary features lead to the irresistible conclusion that whatever the motives which entered into the acquisition of the shares, they were certainly not bought and sold in ordinary course of business of the assessee as a dealer in shares. The answer to the question must, therefore, be in the negative and against the assessee and it was rightly so returned by the Highfacts may be restated asThe market rate of the preference shares remained constant at the figure of Rs. 119 between April 16, 1952 and May 21, 1952.(2) On May 21, 1952 the agreement between Mugneeram Bangur and Kettlewell Bullen and Co. was entered into for purchasing the entire holding of the managing agency company in the managed company.(3) On May 22, 1952, 1620 shares were acquired by the assessee from Mugneeram Bangur and Co., at the rate of Rs. 186 per share. 50 more shares were acquired on May 27, 1952 at Rs. 184 per shar. The shares were obviously acquired at a price which was very much higher than the market price which prevailed only a day before they were purchased by the assessee.(4) Out of 1670 shares taken over by the assessee from Mugneeram Bangur and Co. 1575 were sold back to the same company at the rate of Rs. 115 per share.(5) The profit and loss account for the assessment year 1954-55 showed that the dealings in other shares were of comparatively much lesser value than the shares in question. The profits and losses which had been made and incurred on account of the other shares were also comparatively of minimal nature.(6) The shares of Fort William Jute Co. Ltd., were purchased by the assessee by obtaining an overdraft from aTribunal had negatived the finding of theOfficer and the Appellate Assistant Commissioner that the preference shares had been acquired by the assessee as a pawn in the scheme of transfer of the managing agency of Fort William Jute Co. Ltd. It was, therefore, not open to the High Court to come to the same conclusion by not treating the finding of the Appellate Tribunal as final. Our attention has been invited to the observations in Commissioner ofBombay City I v. Greaves and Co., Ltd., (1968) 68 ITR 200 (SC), that it is not open to the High Court in a reference under Section 66 (1) of theAct 1922 to embark upon aof the evidence and to arrive at findings of fact contrary to those of the Tribunal. The finding of fact will be defective in law if there is no evidence to support it or if the finding is unreasonable or perverse, but it is not open to a party to challenge such a finding unless reference has been made of a specific question concerning that finding. In Oriental Investment Co., P. Ltd. Commissioner of72 ITR 408  =(AIR 1969 SC 460  ) it has been reiterated that in dealing with findings on questions of mixed law and fact, the High Court must accept the findings of the Tribunal on the primary question of fact as final although it is open to the High Court to examine whether the tribunal had applied the relevant legal principles correctly. It is argued that the High Court has not characterised the aforesaid finding of the Appellate Tribunal as perverse or arbitrary and once that finding is accepted, there would be no justification for holding that the assessee had been made a pawn in the matter of the scheme of transfer of the managing agency of Fort William Jute Co., Ltd., by Mugneeram Bangur and Co., or Bangur Brothers Ltd. In any case there were several facts which showed that the assessee was not privy or party to the aforesaid scheme. It did not acquire any interest in the managing agency nor was it a subsidiary or associate of Mugneeram Bangur group of concerns. The assessee was connected with the Bangurs only to the extent that out of its four Directors two of the Directors were Bangurs.