{"id":270442,"date":"1989-02-14T00:00:00","date_gmt":"1989-02-13T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/commissioner-of-income-tax-vs-karam-chand-thapar-bros-p-ltd-on-14-february-1989"},"modified":"2018-02-13T06:20:02","modified_gmt":"2018-02-13T00:50:02","slug":"commissioner-of-income-tax-vs-karam-chand-thapar-bros-p-ltd-on-14-february-1989","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/commissioner-of-income-tax-vs-karam-chand-thapar-bros-p-ltd-on-14-february-1989","title":{"rendered":"Commissioner Of Income Tax, … vs Karam Chand Thapar & Bros. (P) Ltd on 14 February, 1989"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Commissioner Of Income Tax, … vs Karam Chand Thapar & Bros. (P) Ltd on 14 February, 1989<\/div>\n
Equivalent citations: 1989 AIR 1045, 1989 SCR (1) 638<\/div>\n
Author: M Kania<\/div>\n
Bench: Kania, M.H.<\/div>\n
           PETITIONER:\nCOMMISSIONER OF INCOME TAX, CULCUTTA\n\n\tVs.\n\nRESPONDENT:\nKARAM CHAND THAPAR & BROS. (P) LTD.\n\nDATE OF JUDGMENT14\/02\/1989\n\nBENCH:\nKANIA, M.H.\nBENCH:\nKANIA, M.H.\nSHARMA, L.M. (J)\n\nCITATION:\n 1989 AIR 1045\t\t  1989 SCR  (1) 638\n 1989 SCC  (2)\t31\t  JT 1989 (1)\t304\n 1989 SCALE  (1)421\n\n\nACT:\n    Constitution  of  India,  1950--Article  136--<\/a>Tribunal's\ndecision  on  question\tof fact--Such a finding\t not  to  be\ninterfered with unless it is based on irrelevant material or\nperverse.\n    Income-tax\tAct<\/a>,  1961: Section 256-<\/a>-Reference  to\tHigh\nCourt-Question\tof  fact or law--Assessee claiming  loss  on\nsale  of  shares-Whether capital loss, or business  loss  or\ngenuine or bogus--Only question of fact--Tribunal's decision\nfinal--Tribunal need not specifically state its taking\tinto\naccount the cumulative effect of the circumstances-Court not\nto interfere unless Tribunal's decision is based on  irrele-\nvant consideration or perverse.\n\n\n\nHEADNOTE:\n    For the assessment year 1959-60, the Income Tax  Officer\ndisallowed  the loss claimed by the Respondent-assessee,  on\nthe  sale of certain shares, to its allied concern,  on\t the\ngrounds that the sale price was much below the market quota-\ntion and that the motive behind the transactions was to\t set\noff the loss against the profits and hence the\ttransactions\nwere not genuine.\n    On\tappeal by the assessee the Appellate Assistant\tCom-\nmissioner  held\t that the losses on  both  the\ttransactions\ncannot be held to be business losses.\n    ion\t a  further  appeal by the  assessee,  the  Tribunal\nobserved  that there was nothing to show that  the  transac-\ntions in question had anything to do with the control of the\ncompanies  concerned. It also relied upon  the\tcircumstance\nthat  the sales were at the market rates or going rates\t and\nheld  that  there was no question of making  a\tbogus  loss.\nBased  on these facts and circumstances, the  Tribunal\theld\nthat  the  losses in respect of the sales of the  shares  in\nquestion, were liable to be allowed as business losses.\n639\n    The\t Commissioner of Income Tax made an  application  to\nthe Tribunal for referring certain questions for the  deter-\nmination  of the High Court. The Tribunal declined to  refer\nthe questions on the ground that they were not questions  of\nlaw, which deserved to be referred to the Court for determi-\nnation. This order of the Tribunal was confirmed by the High\nCourt.\n    This appeal, by special leave, is against the said order\nof the High Court.\nDismissing the appeal,\n    HELD:  1. Where the Tribunal has come to the  conclusion\nthat the loss incurred by the assessee in the sale of shares\nheld by it was a trading loss and it is not the case of\t the\nDepartment that in arriving at its decision the Tribunal had\ntaken  into consideration any irrelevant material or  failed\nto  take into consideration any relevant material, there  is\nno  room for interference by the court. It is  well  settled\nthat the Tribunal is the final fact finding body. The  ques-\ntions  whether\ta  particular loss is a trading\t loss  or  a\ncapital\t loss and whether the loss is genuine or  bogus\t are\nprimarily  questions  which  have to be\t determined  on\t the\nappreciation of facts. The findings of the Tribunal on these\nquestions  are not liable to be interfered with\t unless\t the\nTribunal has taken into consideration any irrelevant materi-\nal  or\thas failed to take into consideration  any  relevant\nmaterial  or  the conclusion arrived at by the\tTribunal  is\nperverse in the sense that no reasonable person on the basis\nof  the\t facts before the Tribunal could have  come  to\t the\nconclusion to which the Tribunal has come. [645B-D]\n    C.I.T., Bihar & Orissa v. Dalmia Jain & Co. Ltd<\/a>., [1972]\n83 ITR 438, relied on.\n    2.\tIt is equally well settled that the decision of\t the\nTribunal  has  not to be scrutinised  sentence\tby  sentence\nmerely\tto find out whether  all facts have been set out  in\ndetail by the Tribunal or whether some incidental fact which\nappears\t on record has not been noticed by the\tTribunal  in\nits  judgment. If the court, on a fair reading of the  judg-\nment  of the Tribunal, finds that it has taken into  account\nall  relevant  material and has not taken into\taccount\t any\nirrelevant  or impermissible material in basing its  conclu-\nsions,\tthe  decision of the Tribunal is not  liable  to  be\ninterfered with, unless, of\n640\ncourse,\t the  conclusions  arrived at by  the  Tribunal\t are\nperverse -[645DF]\n    3.\tIn the instant case, the Tribunal has taken note  of\nall  the relevant circumstances which appear on\t record\t and\nwhich  were referred to by the Departmental  Representatives\nbefore\tthe  Tribunal.\tIt has not taken  into\taccount\t any\nmaterial which could he said to be irrelevant in arriving at\nits conclusions. In considering whether the shares of Bharat\nStarch\t& Chemicals Ltd. and Greaves Cotton & Co. Ltd.\twere\nheld  by the assessee as stock-in-trade or as  capital,\t the\nTribunal  has taken into account the fact that the  assessee\nwas earlier treated by the Department as a dealer in shares,\nthat  circumstances  cannot he regarded as  irrelevant.\t The\ndecision  arrived  at by the Tribunal cannot be said  to  he\nperverse. [645F-H]\n    Karam  Chand Thapar & Bros. (P) Ltd. v. Commissioner  of\nIncome-tax  (Central), Calcutta<\/a>, [1971] 82 I.T.R.  899;\t re-\nferred to.\n    4. It is not necessary for the Tribunal to state in\t its\njudgment specifically or in express words that it has  taken\ninto  account the cumulative effect of the circumstances  or\nhas  considered\t the totality of facts, as if  that  were  a\nmagic formula; if the judgment of the Tribunal shows that it\nhas, in fact, done so, there is no reason to interfere\twith\nthe decision of the Tribunal. [646B-C]\n\n\n\nJUDGMENT:\n<\/pre>\n
CIVIL  APPELLATE JURISDICTION: Civil Appeal No. 1119(NT)  of
\n1975.\n<\/p>\n
    From  the  Judgment and Order dated\t 16.12.1974  of\t the
\nCalcutta High Court in I.T. Reference No. 256 of 1974.
\nS.C. Manchanda, Ms. A. Subhashini and K.C. Dua, for the
\nAppellant.\n<\/p>\n
    Dr. D.-Pal, Ms. M. Seal, Ms. Mridula Ray and H.K.  Dutt,
\nfor the Respondents.\n<\/p>\n
The Judgment of the Court was delivered by
\nKANIA, J. This is an appeal filed by the Commissioner of
\n641<\/span>
\nIncome-tax, Calcutta, by Special Leave against an order of a
\nDivision  Bench\t of  the Calcutta High\tCourt  declining  to
\ndirect\tthe Income-tax Appellate Tribunal  (hereinafter\t re-
\nferred\tto  as\t“the Tribunal”) to refer to  the  Court\t for
\ndetermination of certain questions raised by the Commission-
\ner of Income-tax.\n<\/p>\n
    It is necessary to set out a few facts for the apprecia-
\ntion of the controversy in this appeal. In its agreement for
\nthe Assessment Year 1959-60 the respondent-assessee  claimed
\ndeductions inter alia in respect of the loss of the sale  of
\ncertain shares of Bharat Starch & Chemicals Ltd. and Greaves
\nCotton\t& Co. Ltd. for the relevant previous year.  The\t re-
\nspondent-assessee  had\tsold in the relevant  previous\tyear
\n2500  shares of Bharat Starch & Chemicals Ltd. to  M\/s\tK.C.
\nThapar\t& Sons Ltd., a company belonging to the same  group.
\nThese shares were purchased on 22nd February, 1958 and\twere
\nsold on 31st March, 1959. The loss claimed was of Rs.26,465.
\nThe Income-tax Officer concerned disallowed this case on the
\nground\tthat the sale price was shown at Rs.2.50  per  share
\nwhereas the market quotation on 31st March, 1959 was Rs.8.06
\nper  share.  The  Income-tax Officer also  relied  upon\t the
\ncircumstances  that  the shares had been sold to  a  company
\nwhich  was an allied concern of the assessee, that  is,\t be-
\nlonging to the Thapar group. The Income-tax Officer took the
\nview  that  the sale had been affected only  to\t enable\t the
\nassessee  to  claim  the loss and could not  be\t allowed  as
\ngenuine.  The respondent-assessee had also sold 3000  shares
\nof  Greaves Cotton & Co. Ltd. on 4th February, 1959  to\t M\/s
\nK.C. Thapar & Sons Ltd., and claimed a loss of Rs.47,878.55p
\non this transaction. The Income-tax Officer held that  these
\nshares\thad  also been sold to a company  belonging  to\t the
\nThapar\tgroup and under the control of that group.  The\t In-
\ncome-tax  Officer took the view that the motive for  selling
\nthe  aforesaid\tshares\tand some other shares  was  to\tmake
\nlosses\t and   set  them  off  against\t the   profits\t and
\nthese  .transactions  could not be considered to be  in\t the
\nnormal course of business. He held that this type of  trans-
\naction\tcould not be regarded as genuine and disallowed\t the
\nclaim.\n<\/p>\n
    The\t assessee preferred an appeal to the  Appellate\t As-
\nsistant\t Commissioner  against the order of  the  Income-tax
\nOfficer.  In  respect of the sale of the  shares  of  Bharat
\nStarch & Chemicals Ltd. the Appellate Assistant Commissioner
\naccepted  that\tthe  market quotation  of  these  shares  at
\nRs.8.06 on 31st March, 1959, was a nominal quotation
\n642<\/span>
\nand  there was no transaction in these shares at  that\trate
\nbecause\t there was no buyer at that price and that  the\t In-
\ncome-tax Officer was wrong in relying upon this circumstance
\nto  come to the conclusion that the transaction of  sale  of
\nthese shares was not genuine. He also took the view that the
\nIncome-tax  Officer was in error when he took the  view\t be-
\ncause  these  shares  had changed  hands  between  companies
\ncontrolled  by the same group that fact vitiated  the  sale.
\nHe, however, took the view that the disallowance was correct
\nas the shares were, in fact, purchased at Rs.2.50 per  share
\nand  sold at the same rate, that is, he disagreed  with\t the
\naverage cost worked out by the assessee and pointed out that
\nthe basis on which such average cost was worked out had\t not
\nbeen shown to him. He further took the view that the  25,000
\nshares\tof this company sold by the assessee  constituted  a
\nlarge block
\n and  was connected with the acquiring of control  over\t the
\nBharat Starch & Chemicals Limited and hence the loss  should
\nbe  regarded as an investment loss and not a business  loss.
\nAs far as the loss on the sale of shares of Greaves Cotton &
\nCo.  Ltd.  was concerned, after referring to the  ground  on
\nwhich  the Income-tax Officer had disallowed this  loss\t the
\nAppellate  Commissioner\t took the view that the\t holding  of
\nthese  shares could be reasonably attributed to the  invest-
\nment  portfolio and hence, the said loss was a capital\tloss
\nand  not a business loss or a revenue loss. He\tfurther\t re-
\nferred to the fact that the shares of this company,  namely,
\nGreaves\t Cotton\t &  Co. Ltd. were not quoted  in  the  stock
\nexchange  market.  On the basis of  these  circumstances  he
\ndisallowed the loss.\n<\/p>\n
     The  assessee went in further appeal to  the  Tribunal.
\nThe Tribunal relied upon the fact that in the earlier years,
\nthe  profits made by the assessee on the sale of shares\t had
\nbeen treated as business income and this would show that the
\nassessee in the earlier years had been regarded as a  dealer
\nin  shares. The Tribunal rightly observed that\tunder  these
\ncircumstances,\tthere was no reason why the assessee  should
\nnot be treated as a dealer in shares in the relevant  previ-
\nous year either. The Tribunal also pointed out that  nothing
\nwas shown on the record which would suggest that the  acqui-
\nsition\tand purchase of these shares was for anything  other
\nthan  normal commercial purposes or that the sales were\t not
\nmade  in the ordinary course of business. The Tribunal\theld
\nthat  the  mere\t fact that the shares have been\t sold  to  a
\ncompany\t belonging  to the same\t group and  under  the\tsame
\ncontrol\t would not be conclusive to show that  the  transac-
\ntions were bogus or
\n643<\/span>
\nnot  in the normal course of business or were for  an  extra
\ncommercial consideration. It was pointed out to the Tribunal
\nby  the\t Departmental Representative  concerned\t that  these
\nshares\twere  shown by the assessee as\tinvestments  in\t the
\nbalance\t sheet. The Tribunal pointed out that  this  circum-
\nstance\twould not necessarily lead to a conclusion that\t the
\nshares\twere  held in the investment portfolio\tand  not  as
\nstock-in-trade\tand in this connection, the Tribunal  placed
\nreliance on the decision of this Court in Karam Chand Thapar
\nand  Bros. P. Ltd. v. Commissioner of Income-tax  (Central),
\nCalcutta<\/a>, [1971] 82 I.T.R. 899 wherein it was held that\t the
\ncircumstances that the assessee had shown certain shares  as
\ninvestment  shares  in its books of account as well  as\t its
\nbalance\t sheet was by itself not a  conclusive\tcircumstance
\nindicating  that the shares were held on investment  account
\nor  capital  account but it was a relevant  circumstance  on
\nwhich the Tribunal could rely for drawing an inference\tthat
\nthe loss on the sale of the said shares was a capital  loss.
\nIt  may be noted that this decision shows that although\t the
\nmanner\tin  which shares are shown in the balance  sheet  or
\nbooks  of account of the assessee is relevant, it is  not  a
\nconclusive  factor  in determining whether the\tshares\twere
\nheld  as  an investment or as stock-in-trade.  However,\t the
\nview taken by this Court in that case was that the loss\t was
\na  capital loss as the sale of the shares was made  after  a
\nlong period of over ten years. In the case before us, howev-
\ner,  the shares have been sold within a much shorter  period
\nwhich would suggest, although by no means conclusively, that
\nthe sales were in the nature of a business transaction.\t The
\nTribunal  also pointed out that the circumstances  that\t the
\ntransactions  were between companies in which  Thapar  group
\nhad a controlling interest and also in respect of shares  of
\ncompanies  belonging to the same group by  themselves  would
\nnot  support  the  conclusion  that  the  transactions\twere
\nstage-managed,\talthough it might arouse suspicion and\tcall
\nfor  a closer scrutiny. In respect of both the said lots  of
\nshares,\t the Tribunal pointed out that there was nothing  to
\nshow  that the purchase of these shares had anything  to  do
\nwith  the control of the companies concerned.  The  Tribunal
\nrelied\tupon  the circumstances that the sales were  at\t the
\nmarket rates or going rates and hence, there was no question
\nof  making a bogus loss. On the basis of these\tconclusions,
\nthe Tribunal held that the losses in respect of the sales of
\nshares\tof  Bharat  Starch & Chemicals Ltd. as\twell  as  of
\nGreaves\t Cotton\t &  Co. Ltd. were liable to  be\t allowed  as
\nbusiness losses.\n<\/p>\n
From  this  decision of the Tribunal,  the  Commissioner  of
\nIncome-\n<\/p>\n
644<\/span><\/p>\n
tax applied to the Tribunal for referring certain  questions
\nfor the determination of the High Court. The Tribunal passed
\nan order referring one question to the Court for  determina-
\ntion but declined to refer the other questions on the ground
\nthat  the decision of the Tribunal was arrived at purely  on
\nthe  appreciation of the facts brought out in  evidence\t and
\nthat  these questions, in respect of which the\tCommissioner
\nwanted a reference, were not questions of law which deserved
\nto  be\treferred to the court for determination.  From\tthis
\ndecision  of the Tribunal, the Commissioner applied  to\t the
\nHigh  Court  for directing the Tribunal to  refer  the\tsaid
\nquestions  also\t to the Court for  determination.  The\tHigh
\nCourt  by its impugned judgment rejected the  said  applica-
\ntion. The present appeal is directed against the said  deci-
\nsion of the High Court.\n<\/p>\n
    When the appeal reached hearing before us, Mr.  Manchan-
\nda,  learned  counsel for the Commissioner  stated  that  he
\npressed\t the appeal only in respect of two  questions  which
\nare as follows:\n<\/p>\n
\t\t    1.\tWhether,  on the facts\tand  in\t the
\n\t      circumstances  of the case, the  Tribunal\t had
\n\t      any evidence and had not relied on  irrelevant
\n\t      or partly irrelevant materials in holding that
\n\t      the transactions entered into by the  assessee
\n\t      in. the purchase and sale of shares of  Bharat
\n\t      Starch  & Chemicals Ltd. and Greaves Cotton  &
\n\t      Co. Ltd. were genuine commercial\ttransactions
\n\t      and  whether  such finding was  not  otherwise
\n\t      unreasonable or perverse?\n<\/p><\/blockquote>\n
\t\t    2.\tWithout\t prejudice to  Question\t No.
\n\t      (1), whether, on the facts and in the  circum-
\n\t      stances  of the case, the\t Tribunal’s  finding
\n\t      that  the assessee entered into  the  transac-
\n\t      tions of purchase and sale of 25000 shares  of
\n\t      Bharat Starch & Chemicals Ltd. and 3000 shares
\n\t      of Greaves Cotton & Co. Ltd. in the course  of
\n\t      its  business as a dealer in shares was  based
\n\t      on  no evidence or was otherwise\tunreasonable
\n\t      or perverse?<\/p><\/blockquote>\n
     In\t deciding the question whether the  Tribunal  should
\nhave  referred the aforesaid two questions to the court\t for
\ndetermination,\tthere  are certain well\t settled  principles
\nwhich  have to be borne in mind. In Commissioner of  Income-
\ntax, Bihar and Orissa v. Dalmia Jain & Co<\/a>.\n<\/p>\n
645<\/span><\/p>\n
Ltd.,  [1972] 83 I.T.R. 438 this Court held that  whether  a
\nparticular  loss  is  a trading loss or a  capital  loss  is
\nprimarily a question of fact. Where the Tribunal has come to
\nthe conclusion that the loss incurred by the assessee in the
\nsale  of the shares held by it was a trading loss and it  is
\nnot  the  case\tof the Department that in  arriving  at\t its
\ndecision  the  Tribunal\t had taken  into  consideration\t any
\nirrelevant material or failed to take into consideration any
\nrelevant material, there is no room for interference by\t the
\ncourt.\tIt  is well settled that the Tribunal is  the  final
\nfact  finding body. The questions whether a particular\tloss
\nis a trading loss or a capital loss and whether the loss  is
\ngenuine\t or bogus are primarily questions which have  to  be
\ndetermined on the appreciation of facts. The findings of the
\nTribunal on these questions are not liable to be  interfered
\nwith  unless the Tribunal has taken into  consideration\t any
\nirrelevant material or has failed to take into consideration
\nany  relevant material or the conclusions arrived at by\t the
\nTribunal is perverse in the sense that no reasonable  person
\non the basis of facts before the Tribunal could have come to
\nthe conclusion to which the Tribunal has come. It is equally
\nsettled\t that  the decision of the Tribunal has\t not  to  be
\nscrutinised sentence by sentence merely to find out  whether
\nall  facts  have been set out in detail by the\tTribunal  or
\nwhether some incidental fact which appears on record has not
\nbeen noticed by the Tribunal in its judgment. If the  court,
\non  a  fair reading of the judgment of the  Tribunal,  finds
\nthat it has taken into account all relevant material and has
\nnot taken into account any irrelevant material in basing its
\nconclusions,  the decision of the Tribunal is not liable  to
\nbe  interfered\twith,  unless, of  course,  the\t conclusions
\narrived\t at  by\t the Tribunal are  perverse.  Keeping  these
\nprinciples  in\tmind in the present case, we find  that\t the
\nTribunal  has taken note of all the  relevant  circumstances
\nwhich  appear  on record and which were referred to  by\t the
\nDepartmental  Representatives  before the Tribunal.  It\t has
\nbeen taken into account any material which could be said  to
\nbe irrelevant in arriving at its conclusions. In considering
\nwhether\t the  shares of Bharat Starch & Chemicals  Ltd.\t and
\nGreaves\t Cotton\t &  Co. Ltd. were held by  the\tassessee  as
\nstock-in-trade\tor as capital, the Tribunal has\t taken\tinto
\naccount\t the fact that the assessee was earlier\t treated  by
\nthe Department as a dealer in shares, as pointed out by\t Mr.
\nManchanda,  but\t that  circumstance cannot  be\tregarded  as
\nirrelevant in view of the decision to which we have  already
\nreferred.  It is also not possible to say that the  decision
\nof the Tribunal is perverse. Mr. Manchanda strongly contend-
\ned  before us that the Tribunal has nowhere stated in  terms
\nthat it
\n646<\/span>
\nhas  taken into consideration the totality of  circumstances
\nor the cumulative effect of the circumstances pointed out to
\nthe Tribunal and hence the matter should be remanded to\t the
\nTribunal. In our view, there is no substance in this submis-
\nsion.  It is true that the Tribunal has not stated in  terms
\nthat it has considered the cumulative effect of the  circum-
\nstances pointed out to the Tribunal, but, on the other hand,
\na  plain  reading of the judgment of the Tribunal  makes  it
\nclear that the Tribunal has, in fact, taken into account the
\ncumulative effect of the circumstances on record before\t the
\nTribunal.  It is not necessary for the Tribunal to state  in
\nits  judgment specifically or in express words that  it\t was
\ntaken  into  account the cumulative effect  of\tthe  circum-
\nstances or has considered the totality of facts, as if\tthat
\nwere a magic formula; if the judgment of the Tribunal  shows
\nthat it has, in fact, done so, there is no reason to  inter-
\nfere  with  the decision of the Tribunal.  In  our  opinion,
\nthere is no merit in this appeal and it must fail.
\nIn the result, the appeal fails and is dismissed with costs.\n<\/p>\n
G.N.\t\t\t       Appeal dismissed.\n\t\t\t\t1<\/span>\n?647\n\n\n\n<\/pre>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Commissioner Of Income Tax, … vs Karam Chand Thapar & Bros. (P) Ltd on 14 February, 1989 Equivalent citations: 1989 AIR 1045, 1989 SCR (1) 638 Author: M Kania Bench: Kania, M.H. PETITIONER: COMMISSIONER OF INCOME TAX, CULCUTTA Vs. RESPONDENT: KARAM CHAND THAPAR & BROS. (P) LTD. DATE OF JUDGMENT14\/02\/1989 BENCH: […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-270442","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nCommissioner Of Income Tax, ... vs Karam Chand Thapar & Bros. 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