Bombay High Court
Cit vs Ramkrishna Bajaj (Huf) on 16 April, 2007
Author: J Devadhar
Bench: J Devadhar, B Dharmadhikari
JUDGMENT
J.P. Devadhar, J.
1. All these applications are filed by the revenue under Section 256(2) of the Income Tax Act, 1961 against the order of the Tribunal dated 10-8-1994, in R. A. Nos. 173, 174, 175, 176 and 177/ Nag/1994. The revenue has raised as many as six questions of law under Section 256(1) of the Act. As the Tribunal has declined to forward the said questions of law, the present applications are filed by the revenue. All these applications were admitted on 20-4-1998, on the following questions of law :
1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the lower authorities were not justified in disallowing the claim of the assessee for losses ?
Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the entire transactions of the alleged conversion of preferential shares into stock-in-trade and the sale thereof was genuine and conducted during the normal course of business ?
Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the assessee was a dealer in shares including the deal in shares of Bajaj Auto Ltd. ?
Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the loss on sale of shares was the business loss and no capital gains arose out of the sale ?
Whether, on the facts and in the circumstances of the case, the Tribunal misdirected itself in coming to a conclusion that the shares were converted into stock-in-trade and the conversion so made was genuine and proper ?
Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the lower authorities below were not justified in giving a finding that the assessee had sought to use the transaction as a device and the losses claimed were artificial losses with a view to reduce the tax liability ?
2. The assessment year involved in all these applications is the assessment 2 year 1982-83.
3. The basic question raised in these applications is, whether the conversion of shares of Bajaj Auto Limited held by the assessee as a capital asset into stock-in-trade was genuine and whether the Tribunal was justified in allowing the loss claimed by the assessee on the sale of these shares.
4. The respondents-assessees in all these applications belong to the Bajaj 4 group. Since the questions raised in all these applications are common, all these applications are heard together and are disposed of by this common judgment. For the sake of convenience we set out the facts from I. T. A. No. 18 of 1995. In this case, the respondent Ramkrishna Bajaj (HUF), had owned 3148 shares of Bajaj Auto Limited and the said shares were held as capital asset. On July 24,1981, the assessee had converted 2500 shares into stock-in-trade. The book value of these shares was Rs. 2,87,100 and the market value being Rs. 1,900 per share, the assessee worked out the value of 2,500 shares at Rs. 47,50,000. The said shares were sold on different dates. In the return of income, the assessee had claimed differential amount of Rs. 11,45,000 as a business loss. The assessing officer held that the conversion of capital assets into stock-in-trade was not genuine, because according to the assessing officer the assessee had confidential information regarding the suit filed against the company in the United States and also in Germany, as a result there was likelihood of a fall in the value of the shares of the company. According to the assessing officer, the conversion of shares was with a view to create an artificial loss. Accordingly, the assessing officer rejected the loss claimed by the assessee and treated the 2500 shares of Bajaj Auto Limited sold by the assessee as a capital asset and treated the differential amount as capital gains.
5. Being aggrieved by the aforesaid order, the assessee filed appeals before the Commissioner (Appeals). The Commissioner (Appeals) upheld the order passed by the assessing officer. On further appeal filed by the assessee the Tribunal held that the conversion of shares was genuine because (a) similar conversion had taken place in the past; (b) conversion of shares was intimated to the assessing officer by letter dated July 24, 1981; (c) the shares were sold through stock exchange and in view of the judgment of the Hon'ble Apex Court in the case of CIT v. Karam Chand Thapar and Bros. P. Ltd. , even if the shares were sold to the dose relative of the assessee the genuineness of the transaction cannot be doubted ; (d) the finding recorded by the assessing officer, that the assessee had confidential information is not correct because the filing of suit against the company in the United States and Germany was disclosed in the annual report of the company.
6. In this view of the matter, in our opinion, the decision of the Tribunal is based on the finding of fact. No referable question of law arises out of the order of the Tribunal. Accordingly, all these applications are dismissed. Rule discharged. No cost.
