Case ID: 1403

Judgment:
Civil Appeal No. 559 of 1960. Appeal by special leave from the judgment and order dated May 1/14	 1957	 of the Income Tax Appellate Tribunal of India (Delhi Bench) in I.T.A. No. 2070 of 1956 57. K.N. Rajagopal Sastri and D. Gupta	 for the appellant. Radhey Lal Agarwal and P.C. Agarwal for the respondents. 867 1962. January 29. The Judgment of the Court was delivered by HIDAYATULLAH	 J. This is an appeal against the order of the Income tax Appellate Tribunal	 Delhi Bench	 dated May 1/14	 1957	 by which the tribunal	 reversing the order of the Appellate Assistant Commissioner	 held that a loss arising from the sale of certain shares by the respondent Company was a capital loss. Subsequent to the order of the Tribunal impugned here	 the Commissioner of Income tax	 New Delhi	 who is the appellant before us	 had moved the Tribunal for a reference to the High Court on certain questions of law said to arise out of the order of the Appellate Tribunal. That application was found to be barred by one day	 and since	 under the law	 the Tribunal had no jurisdiction to extend the time	 the application was dismissed. Against the decision of the Tribunal	 an application was filed in the High Court under section 66(3) of the Income tax Act; but the High Court dismissed the application	 agreeing with the Tribunal that the application to the Tribunal for a reference was barred by time. The Commissioner of Income tax then applied for special leave against the order passed by the Tribunal in the appeal before it	 and the present appeal	 with special leave	 has been filed. Before we examine the merits of the case	 we shall deal with a preliminary objection raised on behalf of the respondent that the appeal is incomepetent	 in view of the decision of this Court in Chandi Prasad Chokhani vs State of Bihar (1) where it was held that this Court would not entertain an appeal directly from an order of the Tribunal by passing the decision of the High Court	 except in very exceptional circumstances. The appellant relies upon the decision of this Court in Baldev Singh vs Commissioner of Income tax (2)	 and contends 868 that the exceptional circumstances existing in the latter case and adverted to in the former	 govern the present case. The facts relating to the filing of the application for reference together with the relevant dates are these: The Tribunal 's order was passed by two learned Members	 who signed their respective orders on different dates. The Accountant Member signed his order on May 1	 1957	 and the Judicial Member	 on May 14	 1957. The notice of the order was sent to the Commissioner of Income tax	 New Delhi	 and reached his office by registered post on July 15	 1957. It was received by one Motilal Pathak	 a clerk in the office of the Commissioner. Motilal 's affidavit shows that	 he suddenly fell ill	 and had to take casual leave for the day. He returned to the office the next day	 and dealt with the notice received from the Tribunal. By a mischance	 which is easy to appreciate	 the date stamp of the receipt of the papers was affixed on the 16th	 and bore that date instead of the real date	 viz.	 the 15th	 on which the papers had actually been received. Relying upon the date stamp	 everybody took it for granted that limitation would expire on the 60th day	 counting time from July 16	 1957. The application was filed on the last day of limitation on that supposition. Actually	 the application was barred by a day. The Income tax Tribunal	 therefore	 dismissed the application on December 4	 1957. The decision of the Tribunal was unsuccessfully challenged before the High Court. It is evident that the decision of the Tribunal was quite correct	 and the Tribunal had no option but to dismiss the application	 since the law gives no jurisdiction to the Tribunal to extend limitation	 as is done under section 5 of the Indian Limitation Act. This Court then granted special leave against the order of the Tribunal passed in the appeal 869 before it	 and the question is whether the appeal should be heard or the leave revoked	 in view of the decision in Chokhani 's case (1). In Chokhani 's case (1)	 the attempt was to bypass the decision of the High Court on a question referred to the High Court for decision and also another decision of the High Court that no other point of law arose from the order of the Tribunal. It was held that this Court would not allow the High Court to be by passed	 and that an appeal from the decision of the Tribunal in the circumstances was incompetent. A similar view was again expressed in two other cases	 viz.	 Indian Aluminium Co. Ltd. vs Commissioner of Income tax (2) and Kanhaiyalal Lohia vs The Commissioner of Income tax (3). In all the three cases	 reliance was placed by the appellants therein upon the decisions of this Court in Dhakeswari Cotton Mills	 Ltd. vs Commissioner of Income tax (4) and Baldev Singh vs Commissioner of Income tax (5) It was pointed out in the judgments of this Court that the two cases relied upon were decided on the special circumstances existing there. In the first	 there was a question of breach of the principles of natural justice	 which could not be raised otherwise than by an appeal with the special leave of this Court. In the second case	 it was pointed out that limitation was lost by the party through no fault of his	 inasmuch as a letter was unduly delayed in post. In our opinion	 in the present case also	 special circumstances which justified the grant of special leave in Baldev Singh 's case (5)	 exist. There was a combination of circumstances which led to the filing of the application a day late	 but in circumstances showing that the default was not due to any negligence on the part of the Commissioner of Income tax. The receipt of the notice on July 15 is admitted; but the affixing of the date stamp on the 16th was due to the failure of the 870 clerk to deal with the notice on the 15th because he fell ill and had to leave the office. It is common knowledge that date stamps are altered every day in the office	 and this is done mostly by a very junior employee. The affixing of the date stamp on the 16th and the notice consequently bearing that date went unnoticed	 and relying upon the date stamp	 the appeal was filed	 though on the last day of limitation but within time. In these circumstances	 it is difficult to say that the Commissioner of Income tax was negligent and the negligence	 if any	 on the part of the clerk in affixing a wrong date stamp is excusable	 if one considers his illness and his absence from the office on the 15th. In our opinion	 this case comes within the rule of Baldev Singh 's case (1) and an appeal direct to this Court from the Tribunal 's order is justified by the special circumstances. By this appeal	 no decision of the High Court can be said to be bypassed	 because the decision of the High Court related to the correctness of the decision of the Tribunal on the question of limitation	 which is not a question which is sought to be raised in an indirect way by the present appeal. We	 therefore	 overrule the preliminary objection. The assessee Company is the National Finance Ltd.	 New Delhi. It is a public limited Company which was incorporated in 1943. It deals in shares and securities and also as financiers. The present case arises from a deal in 3	000 shares of the Madhusudan Mills Ltd.	 Bombay	 by the assessee Company. In the year of account	 May 1	 1949	 to April 30	 1950	 corresponding to the assessment year	 1951 52	 the assessee Company sold these shares suffering a loss of Rs. 5	48	712 8 0	 which it claimed as one on the sale of its stock in trade. The Income tax Officer and the Appellate Assistant Commissioner held it to be a capital loss. The 871 Appellate Tribunal	 Delhi Bench	 reversed the decision	 and held in favour of the assessee Company. The only question in this appeal is whether the decision of the Tribunal is right. The assessee Company belongs to a group of Companies controlled by one Lala Yodh Raj Bhalla and certain persons associated with him. It is convenient to describe these persons as the 'Yodh Raj Bhalla group '. These Companies are (1) Jaswant Sugar Mills Ltd.	 (2) Jaswant Straw Boards Ltd.	 (3) National Finance Ltd.	 (4) National Construction and Development Corporation Ltd.	 (5) Ganesh Finance Corporation Ltd.	 and (6) Raghunath Investment Trust Ltd. The interrelation of these. Companies is very intimate	 and they are practically owned by the 'Yodh Raj Bhalla group '. To understand this	 the following analysis of the shareholdings of these Companies must be sufficient: (1) Jaswant Sugar Mills Ltd. 2	00	000 shares (i) Jaswant Straw Board Ltd. 44	845 (ii) National Finance Ltd. 67	390 (iii)National Construction and Development Corporation Ltd. 47	800 _______ 1	60	 035 (i.e. over 80 per cent) (2) Jaswant Straw Board Ltd. 6	176 shares. (i) National Finance Ltd. 4	783 (ii) National Construction and Development Corporation Ltd. 500 _____ __ 5	200 odd (or nearly 84 per cent) 872 (3) National Finance Ltd. (assessee Company) 50	000 shares. Ganesh Finance Corporation Ltd. 48	000 (or over 96 per cent) (4) National Construction and Develop ment Corporation Ltd. 1	30	504 shares. Ganesh Finance Corporation Ltd. 1	30	500 (almost all) (5) Ganesh Finance Corporation Ltd. 50	000 shares. Raghunath Investment Trust Ltd. 49	795 (99.6 per cent of the capital) (6) Raghunath Investment Trust Ltd. 10	000 shares. (i) Mr. Yodh Raj Bhalla 1	500 (ii) Mrs. Bhalla 1	000 (iii) Mr. N. C. Malhotra (brother in law) 1	000 (iv) Mr. Ram Prasad (father in law) 1	000 (v) Mr. Dina Nath (Secretary) 1	000 (vi) National Finance Ltd. 3	499 (vii) Mr. Piyare Lal Saha 1 9	000 (90 per cent). The resulting position may be stated thus: Ganesh Fiance Corporation Ltd. practically owns the assessee Company and National Construction and Development Corporation Ltd.	 Raghunath Investment Trust Ltd. practically owns the Ganesh Finance Corporation Ltd.	 and 'Yodh Raj Bhalla group ' practically owns Raghunath Investment Trust Ltd. 873 Jaswant Sugar Mills Ltd. is practically owned by Jaswant Straw Board Ltd.	 National Finance Ltd.	 and National Construction and Development Corporation Ltd.	 and Jaswant Straw Board Ltd.	 is practically owned by National Finance Ltd.	 and National Construction and Development Corporation Ltd. Thus	 the entire group is owned by a consortium	 and there is no doubt about it. The shares of Madhusudan Mills Ltd. were acquired in the following circumstances: In July 1948	 Mr. Yodh Raj Bhalla	 who was in a position by reason of his holdings in these six Companies to influence decisions of the Board of Directors	 arranged to purchase 26	547 shares of the Mills from Messrs. Bhadani Brothers	 Ltd.	 who were the managing agents of the Mills. This block of shares represented about 80 per cent of the total issued capital of the Mills	 The purchase was made at Rs. 400 per share	 when the price in the market	 was about Rs. 250 per share. Out of the remaining shares which were on the market 200 shares were purchased at Rs. 252 8 0 per share	 which was then the quoted price. Now	 these shares were purchased by Jaswant Sugar Mills Ltd.	 but the money for the purchase of the shares was obtained by borrowing it from some of the other concerns. These Companies	 as has been shown above	 were completely under the control of 'Yodh Raj Bhalla group '. The arrangement for the money was as follows: Rs. 14	75	000 borrowed from the assesee Company. Rs. 5	00	000 from National Construction and Development Corporation Ltd. Rs. 55	00	000 from the assessee Company but advanced by Ganesh Finance Corporation Ltd. 874 The shares were registered as follows: 10	500 shares registered in the name of the assessee Company. 5	400 shares in the name of the National Construction and Development Corporation Ltd.	 and the balance in the names of the nominees of Jaswant Sugar Mills Ltd.	 which meant	 largely	 persons belonging to the 'Yodh Raj Bhalla group '. On October 9	 1949	 the assessee Company purchased 15	547 shares at Rs. 400 per share from Jaswant Sugar Mills Ltd.	 and the amount paid by the assessee Company was adjusted towards the purchase price and the balance was paid. On the same day	 the remaining 11	000 shares were sold by Jaswant Sugar Mills Ltd. to National Construction and Development Corporation Ltd.	 at Rs. 400 per share. Thus	 on that date Jaswant Sugar Mills Ltd. ceased to have any connection with the present matter. It may be pointed out that on the date on which the two transactions took place	 the priceruling in the market was about Rs. 217 8 0. Before Jaswant Sugar Mills Ltd. parted with the shares	 they. had appointed a new Board of Directors of the Madhusudan Mills Ltd.	 and these new Directors also belonged to the same group. The managing agency of Messrs. Bhadani Brothers Ltd. was terminated	 and on the same day on which the shares were purchased from these managing agents	 the assessee Company was appointed as the purchasing and selling agent of the Mills. The assessee Company made enormous profit from the acquisition of these shares by way of dividend and commission as the purchasing and selling agent. In October and November	 1948 they	 however	 sold 6	525 shares to Dalmia Cement and Marketing Company Ltd. at Rs. 400 per share. These shares subsequently came back to the same group; but 875 that is not a matter with which we are immediately concerned. On April 7	 1949	 4	500 shares were sold by the assessee Company to the National Investment Trust Ltd. at Rs. 181 per share resulting in a loss of Rs. 8	80	000	 and on June 1	 1949	 another block of 3	000 shares was sold to the National Investment Trust Ltd.	 at Rs. 180 per share	 resulting in a loss of Rs. 5	86	312. We are not concerned with the loss arising from the first sale which was considered in the assessment year	 1950 51	 and in respect of which a reference is pending in the High Court of Punjab. We are concerned with the loss in the second year relating to the assessment year	 1951 52. In that year	 the loss on the sale of the shares was sought to be set off against the profits made	 and the loss practically cancelled the profits. The shares which were sold by the assessee Company on the two occasioning were sold to one Amrit Bhushan (a relative of Mr. Yodh Raj Bhalla) who sold then the same day to Messrs. National Investment Trust Ltd.	 at the slender profits of 8 annas per share	 which was brokerage. Thus	 at the beginning and at the end	 though numerous transactions had taken place	 the shares continued to be the property of the 'Yodh Raj Bhalla group '. The question is whether the loss on the sale of the shares be set off against the profits in the year in which the sales and profits were respectively made. The assessee Company was assessed for the assessment year	 1950 51	 by the Income tax Officer	 Meerut. In that year	 the loss of Rs. 8	78	062 8 0 arising from the sale of Rs. 4	520 shares of Madhusudan Mills Ltd. was set off against the profits of the assessee Company. The case of the assessee Company for the assessment year	 1951 52	 was considered by the Income tax Officer	 Central Circle V	 New Delhi	 to whom the cases of the other Companies above named were also transferred. By looking into the 876 affairs of these Companies	 he came to learn	 that the shares of the Madhusudan Mills Ltd. were purchased at a price	 which was almost double the current market price	 by the 'Yodh Raj Bhalla group	 and were transferred at the same price to the assessee Company. He found that this was done with a view to removing Messrs. Bhadani Brothers	 Ltd. from their managing agency and to securing for the assessee Company the purchasing and selling agency of the Mills. On the date of the purchase from Messrs. Bhadani Brothers	 Ltd.	 Jaswant Sugar Mills Ltd. achieved this purpose in view of their controlling interest. Bhadani Brothers	 Ltd. ceased to be the managing agents from that date	 and the purchasing and selling agency of the Madhusudan Mills	 Ltd. was given to the assessee Company	 though it had	 on that day	 done no more than give a loan to Jaswant Sugar Mills Ltd. In the assessment year	 1951 52	 the loss of Rs. 5	86	312 8 0 on the sale of 3	000 shares was	 therefore	 disallowed holding it to be a capital loss. The order of the Income tax Officer	 Central Circle V	 New Delhi was confirmed on appeal by the Appellate Assistant Commissioner. On further appeal by the assessee Company	 the Income tax Appellate Tribunal	 Delhi	 reversed the order of the Appellate Assistant Commissioner	 and held that the loss was a trading loss. Whether a particular loss is a trading loss or a loss on the capital side undoubtedly depends upon the facts of each case. But it has been held	 over and over again	 that the question is not one of pure fact	 and that a mixed question of fact and law is always involved. The cases to which we shall make a reference presently	 have laid down this proposition	 and those cases have also indicated how the matter is to be viewed in the context of facts. In Commissioner of Income tax vs Ramnarain Sons Ltd. (1)	 the Company was a dealer in shares 877 and also carried on the business of acquiring managing agencies of other Companies. The Company the acquired the managing agency of a Textile Mill from Messrs. Sassoon J. David and Co. Ltd.	 and also agreed as part of the same transaction to buy 2	507 shares of the Mills. 1	507 shares were purchased at Rs. 2	321 8 0 per share	 and the remaining 4	000 shares were purchased at Rs. 1	500 per share. These shares were quoted on the market at Rs. 1	610. Later	4	000 shares were sold at a loss of Rs. 1	78	000 This was shown in the books of the Company as a busines loss but was disallowed	 as the shares were not held to be the stock in trade of the business of the Company as share dealers. On a reference to the High Court of Bombay	 a Divisional Bench upheld the view of the Tribunal. Chagla	C. J.	 in delivering the judgment of the Court	 observed that a managing agency being an asset of an enduring nature	 the way to look at the matter was to enquire what was	 the primary intention in acquiring the shares. The learned Chief Justice then referred to a judgment of this Court reported in Kishan Prasad & Co. Ltd. vs Commissioner of Income tax (1)	 where it was observed: "It seems that the object of the assessee Company in buying shares was purely to obtain the managing agency of the third mill which no doubt would have been an asset of an enduring nature and would have brought them profits but there was from the inception no intention whatever on the part of the assessee Company to re sell the shares either at a profit or otherwise deal in them." The learned Chief Justice then considered the argument that a block of shares might have to be bought	 if at all	 at a higher price	 and observed as follows: "A dealer in shares may succeed in getting a large number of shares at a price less than 878 the market price if the seller is in difficulties and wants to get rid of his shares and to get liquid assets. But we have not heard of a dealer in shares purchasing a large number of shares at a higher value than the market value. The other circumstance which is equally strong in this case is that the shares were purchased for the acquisition of the managing agency. Therefore the real object of the assessee company was not to do business in these shares	 not to make profit out of these shares	 but to acquire a capital asset out of which it would earn managing agency commission and make profit." Messrs. Ramnarain and Sons. Ltd. then appealed to this Court	 and the decision of the Bombay High Court was upheld. The Judgment of this Court is reported in Ramnarain Sons (Pr.) Ltd. vs Commissioner of Income tax (1). It was laid down by this Court that in considering whether a transaction was or was 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". Dealing with the price above the market price which was paid in that case	 it was observed: "Even assuming that the appellants acquired the entire block of 2	507 shares from M/s. Sassoon J. David & Co. Ltd. the shares transferred to the names of the directors being held by them merely as nominees of the appellants the price per share was considerably in excess of the prevailing market rate. The only reason for entering into the transaction	 which could not otherwise be regarded as a prudent business transaction	 was the acquisition of the 879 managing agency. If the purpose of the acquisition of a large block of shares at a price which exceeded the current market price by a million rupees was the acquisition of the managing agency	 the inference is inevitable that the intention in purchasing the shares was not to acquire them as part of the trade of the appellants in shares. " The above two decisions are merely the application of a principle of long standing	 which has been stated over and over again in the past. In Oriental Investment Co. Ltd. vs Commissioner of Income tax (1)	 that principle was reiterated	 and it was that the object for which a company was formed did not invest the deal with the characteristics of a trade in shares	 but that other circumstances along with that fact must be considered to find out the real object of a particular venture. Before we deal with the present case	 one other case of this Court may be noticed. In Rajputana Textiles vs Commissioner of Income tax (2)	 the converse conclusion was reached. There	 on the facts and circumstances of the case	 it was held that a particular deal in shares was a commercial venture and had all the attributes of an adventure in the nature of trade. In that case	 the transaction was not a single or an undivided one with a slump payment	 because for the managing agency	 Rs. 12	50	000 were paid separately and for the shares	 a sum of Rs. 83	98	000 was paid. The two acquisitions being different	 the profit on the sale of some of the shares was considered to be a gain on the revenue side. There is no doubt	 whatever	 that the shares of the Madhusudan Mills Ltd. were acquired at a price considerably higher than the market price. In fact	 that the price paid was almost double. Such a deal	 from the business point of view	 was not prudent	 unless the purchaser stood to gain in some 880 other way. It was contended before us that this was a speculative deal in the hope that the price of the shares would firm up when the textile industries would revive. If this was the intention	 then it might possibly be argued that the purchasers miscarried in their calculations	 and suffered a loss in a business transaction. But	 was this the intention of the Directors of Jaswant Sugar Mills Ltd. ? Those who sold the shares were not only in possession of the shares but also of the managing agency of the Madhusudan Mills Ltd.	 and the intention of the Directors of Jaswant Sugar Mills Ltd. was to remove the sellers from their position as managing agents and to get the entire benefit of such or other agencies for themselves. The assessee Company has urged that might have been the intention of they Jaswant Sugar Mills Ltd. but not of the assessee Company which had	 on that day	 merely given a loan to Jaswant Sugar Mills Ltd. Curiously enough	 however	 the immediate benefit of the deal was the acquisition of the selling and purchasing agency of the Mills	 and that was obtained not in favour of Jaswant Sugar Mills Ltd. but of the assessee Company	 even though on July 15	 1948 (the date of purchase) the assessee Company had obtained registration of 10	5000 shares by way of security in its own name. Why the assessee Company was favoured in this way is not far to seek. It mattered not whether Jaswant Sugar Mills Ltd. acquired that agency or the assessee Company; the benefit thereof went to the same group of persons. The transaction of sale of the shares was also made within three months of their purchase	 and the assessee Company not only bought the 10	500 shares which stood in its name but 15	547 shares	 which gave the assessee Company a controlling voice in the affairs of the Mills. The assessee Company continued to retain the selling and purchasing agency	 which was very profitable. Indeed	 on its investment in the first year of Rs. 14 lakhs odd	 it 881 made a profit of about Rs. 7 lakhs. The question	 therefore	 would be whether the assessee company in purchasing the shares merely wished to deal in shares as stock in trade	 or was acquiring a capital asset of an enduring nature. This question is not one of fact	 pure and simple	 hut one of an inference in law from the proved circumstances of the case. The Income tax Officer	 in deciding this question against the assessee Company	 pointed out numerous circumstances	 which showed clearly that this was not a mere purchase of shares as shares by a speculator	 who	 buying a big block	 sometimes pays slightly more than the market rate. Bhadani Brothers Ltd.	 owned not only the shares but also the managing agency	 and it is obvious that they would not part with the shares without charging for the managing agency. The price of Rs. 400 per share was so out of proportion to the market price that it indicated	 by itself	 the acquisition of something more than the mere shares. According to the Income tax officer	 the real intention was to acquire lucrative agencies of the Mills	 and this intention	 whether it was held by Jaswant Sugar Mills Ltd. Or the assessed Company or both	 was of the same body of persons. The Appellate Assistant Commissioner endorsed the view of the Income tax officer; but the Tribunal made a distinction between one Company and another	 and that distinction has been pressed upon us by the assessee Company. Relying upon the well known case of Salomon vs Salomon & Co. Ltd.(1)	 it was argued before us that each company must be viewed as a separate entity	 and that the intention of one company could not be attributed to another company	 even though the proprietorship of the companies might be same. As a proposition affecting companies	 it cannot be gainsaid; but we are not concerned with a theoretical question as to the assesee Company being a separate legal entity	 but with the 882 question whether a particular loss made by the assessee Company is a capital or a revenue loss. The two Companies	 i. e.	 jaswant Sugar Mills Ltd. and the assessee Company	 were directed by the same set of persons	 and the facts show that even though Jaswant Sugar Mills Ltd. temporarily acquire the shares	 they conferred all the benefits of the acquisition upon the assessee Company from the very first day. The assessee Company also ultimately came into possession of all the shares along with another Company	 which was also directed by the same persons	 and Jaswant Sugar Mills Ltd. went out of the picture within three months. In these circumstances	 it is easy to see that the interposition of Jaswant Sugar Mills Ltd. was merely a device to secure the benefit of the English case	 to which we have referred. It was never intended that Jaswant Sugar Mills Ltd. would hold the shares or the benefits arising from the acquisition of a block of shares	 giving to the holder a decisive voice in the affairs of Madhusudan Mills Ltd. That controlling interest was acquired by the `Yodh Raj Bhalla group ' for the benefit of the assessee Company	 and it was an acquisition of an interest of an enduring nature. Reference was made	 in this connection	 to the transactions with the Dalmia Cement and Marketing Co. Ltd. in which the latter paid the same price namely	 Rs. 400 per share. Perhaps	 the Dalmia Company was after the controlling interest in its own way	 and it is significant to note that within a short time	 those shares again found their way in the hands of the same group. Similarly	 the shares changed hands even within this group through the agency of Amrit Bhushan	 no doubt a broker but also a relative of Mr. Yodh Raj Bhalla	 who profited only to the extent of 8 annas per share	 and bought and sold the shares from one Company to mother on the same day. All this show that the affairs of there Companies were centrally arranged	 and the 883 intention was to benefit the assessee Company by the acquisition of a large block of shares at a very much later prices than obtaining in the market	 to acquire certain agencies of a profitable character. In our opinion	 this transaction must be regarded as one on the capital side. Shares were never treated as part of the stock in trade. They were not sold in the market	 but were sold at a loss to another Company belonging to the same group	 with the obvious intention of setting off the losses against the profits	 thus cancelling the profits	 and saving them from taxation. In the result	 the appeal is allowed	 with costs on the respondent. Appeal allowed.

Summary:
The respondent was a company dealing in shares and securities and belonged to a group of companies all controlled by the same persons. In the year of account	 corresponding to the assessment year 1951 52	 the respondent sold the shares relating to Madhusudan Mills Ltd.	 which it had acquired sometime earlier	 suffering a loss for which it claimed a set off against the profits in that year. The Income tax Officer found that the shares in question had been purchased by J	 a company belonging to the group	 at a price which was almost double the current market price	 that it was so done with a view to removing the sellers from their managing agency and to securing for the respondent the purchasing and selling agency of the Mills	 and that after the purchase J achieved the purpose in view of its controlling interest and the purchasing and selling agency of the Mills was given to the respondent	 though the latter had done no more than give a loan to J. It was also found that soon after the purchase the shares in question came into the possession of the respondent and that when the shares were sold it was not in the market but at a loss to another company belonging to the same group. The Income tax Officer came to the conclusion that in getting the shares the respondent did not deal with them as stock in trade but was acquiring a capital asset of an enduring nature. Accordingly	 he disallowed the claim holding the loss to be a a capital loss. The Appellate Tribunal	 however	 held in favour of the respondent on the view that a distinction must be made between the respondent company and J. The Commissioner of Income tax moved the Tribunal for a reference to the High Court	 but it was dismissed on the ground that though it was barred only by one day and there was no negligence on the part of the Commissioner	 the Tribunal had no power to extend time. An application to the High Court was also dismissed. The Commissioner of Income tax then applied for and got special leave to appeal against 866 the order passed by the Tribunal. When the appeal came on for hearing in due course the respondent raised an objection that the appeal was not maintainable because no appeal was filed against the order of the High Court	 and relied on the decision in Chandi Prasad Chokani vs State of Bihar	 ; ^ Held	 that the appeal was maintainable because there was no question of by passing the order of the High Court which only related to the correctness of the decision of the Tribunal on the question of limitation which was not the subject of the present appeal. Held	 further	 that there were special circumstances which justified the grant of special leave. Baldev Singh vs Commissioner of Income tax 	 applied. Chandi Prasad Chokhani vs State of Bihar ; 	 distinghuished. Held	 also	 that	 on the facts	 the object was to purchase a large block of shares at a much larger price than the market value to acquire certain agencies of a profitable character	 that the purchase of the shares by J was merely a device but the controlling interest was acquired by the respondent	 and that the transaction must be regarded as one on the capital side. Ramanarain Sons (P.) Ltd. vs Commissioner of Income tax	 ; and Oriental Investment Co. Ltd. vs Commissioner of Income tax	 ; 	 applied. Salomon vs Salomon & Co. Ltd. ; 	 distinguished.