COMMISSIONER OF INCOME TAX vs. SHAHIBAUG ENTERPRISES (P) LTD

ITR/257/1995HC GujaratGJHC24022580199522 January 2008Author: HONOURABLE MR. JUSTICE D.A.MEHTA,HONOURABLE MR. JUSTICE Z.K.SAIYED4 pages
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What were the facts?

The assessee, Shahibaug Enterprises (P) Ltd., sold shares of Suhrid Geigy Ltd. and Wadi Chemicals P. Ltd. to its wholly-owned subsidiary companies during the financial year ended March 31, 1979, relevant to assessment year 1979-80. The assessee claimed the capital gains arising from these sales as exempt under Section 47(iv) of the Income Tax Act, 1961. The Assessing Officer disallowed this claim, treating the transactions as business income. The Commissioner of Income Tax (Appeals) upheld the Assessing Officer's view. The Income Tax Appellate Tribunal, however, deleted the addition of Rs. 1,85,93,546/-, accepting the assessee's contention that the gains were capital in nature and exempt under Section 47(iv). The Revenue has filed a reference to the High Court.

What did the High Court hold?

The High Court held that the Appellate Tribunal was right in deleting the addition of Rs. 1,85,93,546/-. The Court noted that in a similar case, Sercon P. Ltd. (ITA No. 393/Ahd/1984), the Tribunal had decided the issue in favour of the assessee, and the Revenue's application under Section 256(2) to refer a question of law was rejected by the High Court. The Court applied the principle laid down in Union of India & Ors. vs. Kaumudini Narayana Dalal & Anr. (2001) 249 ITR 219, stating that it is not open for the Revenue to accept a judgment in one assessee's case and challenge its correctness in another's without just cause. Since no distinguishing feature was pointed out by the Revenue and the issue was concluded in favour of the assessee in the Sercon P. Ltd. case, the question referred to the Court was answered in the affirmative, upholding the Tribunal's view. The reference was disposed of accordingly.

What were the issues?

1. Whether the Appellate Tribunal is right in law and on facts in deleting the addition of Rs. 1,85,93,546/-, holding that the amount in question represented capital gains and the said capital gains was exempt under Section 47(iv) of the Income Tax Act, 1961? Assessee's Contentions: The assessee argued that the shares were reflected as investments in its balance sheet. In a prior assessment year (1978-79), the Assessing Officer had treated profits on sale of similar investments as capital gains, not business profit, and rejected the assessee's claim of stock-in-trade. Profits or losses from such transactions had consistently been treated as capital gains or losses, not business income or loss. Revenue's Contentions: The Revenue contended that the assessee was carrying on the business of purchasing and selling shares, thus the gains should be treated as business income and not eligible for exemption under Section 47(iv).

Which sections of the Income-tax Act were involved?

Section 47(iv),Section 256(2)

AI-generated summary — verify with the full judgment below

ITR/257/1995 1/4 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No. 257 of 1995 For Approval and Signature: HONOURABLE MR.JUSTICE D.A.MEHTA HONOURABLE MR.JUSTICE Z.K.SAIYED ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================================= COMMISSIONER OF INCOME TAX - Applicant(s) Versus SHAHIBAUG ENTERPRISES (P) LTD - Respondent(s) ========================================================= Appearance : MR MANISH R BHATT for Applicant(s) : 1, MR RK PATEL for Respondent(s) : 1, ========================================================= CORAM : HONOURABLE MR.JUSTICE D.A.MEHTA and HONOURABLE MR.JUSTICE Z.K.SAIYED Date : 22/01/2008 ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE D.A.MEHTA)

ITR/257/1995 2/4 JUDGMENT

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