RAJA BAHADUR VISHESHWARA SINGH AND OTHEHS. vs. COMMISSIONER OF INCOME-TAX, BIHAR AND ORISSA

CIVIL APPEAL No. 137/1958Supreme Court[1961] 3 S.C.R. 28715 December 1960Bench: 3 JudgesAuthor: J.L. KAPUR, M. HIDAYATULLAH, J.C. SHAH10 pages
AI SummaryDismissed

What were the facts?

The assessee, Raja Bahadur Visheshwara Singh, appealed against the order of the Commissioner of Income-tax, Bihar and Orissa. The assessment years in question were 1944-45 to 1948-49. The dispute concerned the taxability of profits made from the purchase and sale of shares and securities. The assessee, who was the son of the late Maharaja of Darbhanga, invested his surplus cash in shares and securities, maintaining a dedicated account (Account Book No. 1). He also opened a new account (Account No. 2) for transactions involving money borrowed from his brother. The Income-tax Officer treated profits from these transactions as business profits. The Appellate Assistant Commissioner upheld the assessments but excluded profits for 1944-45. The Appellate Tribunal, on appeal by both parties, held that the assessee was a dealer in shares and securities, making the profits taxable. The High Court upheld this finding.

What did the Supreme Court hold?

The Supreme Court held that on the materials produced and facts proved, the appellant was rightly assessed. The Court reiterated the principle that while an enhanced price from realizing an ordinary investment is not taxable profit, an amount recovered as appreciation is assessable if the transaction is truly the carrying on of a business, not merely a realization or change of investment. The substantial nature of the transactions, the manner of book-keeping, the magnitude of shares purchased and sold, and the ratio between purchases, sales, and holdings justified the Tribunal's conclusion that the appellant was dealing in shares as a business. The High Court rightly upheld these findings. Regarding the second issue, the Court stated there is no res judicata in income-tax matters, and it was open to the Appellate Tribunal to reach its finding. The High Court correctly answered both questions in the affirmative. The appeals were dismissed.

What were the issues?

1. Whether, in the circumstances of the case, there is material to support the finding of the Appellate Tribunal that the assessee was a dealer in shares and securities with respect to each of the accounts, and therefore liable to be taxed? (Question of mixed law and fact, concerning Section 66(2) of the Indian Income-tax Act, 1922). 2. Whether, having regard to the finding of the Appellate Tribunal in respect of the 1941-42 assessment, it was open to the Appellate Tribunal in the present case to hold that the profits and transactions of sale and purchase of shares and securities amounted to profits of business and so liable to be taxed? (Question of law, concerning Section 66(2) of the Indian Income-tax Act, 1922). Assessee's Contentions: The assessee contended that being a Zamindar, the buying and selling of shares was not his normal activity. He argued that his purchases and sales were in the nature of investments of his surplus monies, and therefore, the excess amounts received on sales were capital receipts, not business profits. He relied on Raja Bahadur Kamakshya Narain Singh v. Commissioner of Income-tax, Bihar and Orissa, Californian Copper Syndicate Limited v. Harris, Cooper v. Stubbs, Leeming v. Jones, and Edwards v. Bairstow & Harrison. Revenue's Contentions: The judgment does not explicitly record the revenue's specific arguments beyond its stance upheld by the lower authorities and the High Court.

Which sections of the Income-tax Act were involved?

Section 66(2)

AI-generated summary — verify with the full judgment below

3 S.C.R. SUPREME COURT REPOR'l'S 287 deriving the agricultural income" are used in the latter.

196.

0 If anything the words of the former Act are more .t: bl h d The Commissiontr 1avoura e to t e respon ent. , . of Ag>icultural In Travancore Rubber and 'I ea Company Ltd. v. Income-ta.> Commissioner of Agricultural Income Tax, Kerala ('), v. which was an assessment under the Travancore The Calva'Y Cochin Act, we have decided the question of deducti- Mount Estates bility of sums expended for purposes of forking, (P,ivat<) Ltd. manuring etc .. of immature rubber trees. That judg- Kapu' J. ment will govern this case also. This appeal there- fore fail.s and is dismissed wi~h costs in this courL and the High Court. Appeal dismissed RAJA BAHADUR VISHESHWARA SINGH AND OTHEHS. v. COMMISSIONER OE' INCOME-TAX, BIHAR AN'D ORISSA (J. L. KA!'UR, M. HIDAYATULLAH and J.C. SHAH, JJ.) Income Tax-l'urihase and sate of shares and scwrities with surplus tn.oney-Such transactions, if amount to investment or busi· ness in shares~Test-Excess sale proceeds-If amou,nt to business profit or mere accretion to capital-Indian Income-tax Act, 1922 (II of 1922), s. 66(2). The

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