Oriental Investment Company LTD. vs Commissioner Of Income-tax Bombay

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1957 Supreme(SC) 65

SUPREME COURT OF INDIA
22nd May, 1957
BHAGWATI, S.K. DAS AND KAPUR, JJ
Oriental Investment Co. Ltd. Appellant
Versus
Commissioner of Income-tax Bombay, Respondent.
Civil Appeal No. 153 of 1954.
Advocates appeared
Mr. R. J. Kolah, Advocate and M/s. J. B. Dadachanji, S. N. Andhley and Rameshwar Nath, Advocates of M/s. Rajinder Narain & Co., for Appellants; Mr. C. K. Daphtary Solicitor-General of India, (M/s. G.N. Joshi and R. H. Dhebar, advocates, with him), for Respondent.

Advocates:
C.K.DAFTARY, G.N.Joshi, J.B.DADACHAN, R.H.Dhebar, R.J.KOLAG, RAJINDAR NARAIN, RAMESHWAR NATH ROY, S.N.ANDLEY

Headnote:Sections 66(1) and (2)-Question of law and question of fact Test to determine.
       Held: The primary requirement of sub-ss. (1) and (2) of S. 66 is that there must be a question of law arising out of the order. To draw a line between what is a question of law and what is a question of fact is not always easy. It is difficult to define this distinction. However, the decisions bearing on this question arising out of the assessment proceedings before the Income-tax Officers indicate the following principles:
       (i) A Court has no jurisdiction over conclusions of fact except to see whether there is evidence to justify them and that proper legal principles have been applied.
       (ii) An inference from facts will be a question of fact or of law according as the point for determination is one of pure fact or a mixed question of law and fact.
       1. For facts of this case, see p. 984 ante.
       (iii) A construction of a statute or document of title is a question of
       (iv) When the point for determination is a mixed question of law and fact, while the finding of the Tribunal on the facts found is final its decision as to the legal effect of .those findings is a question of law.
       (v) A finding on a question of fact is open to attack as erroneous in law if there is no evidence to support it or if it is perverse.
       (vi) When the finding is one of fact, the fact that it is itself an inference from other basic facts will not alter its character as one of fact.
       What are the characteristics of the business of dealing in shares or that of an investor is a mixed question of fact and law. What is the legal effect of the facts found by the Tribunal and whether as a result the assessee can be termed a dealer or an investor is itself a question of law.

Judgement

KAPUR J. - This is an appeal by the assessee by special leave and the question for decision is whether questions of law, if any, arise out of the order of the Appellate Tribunal.

2. The facts giving rise to the appeal are that the Petitioner company was incorporated on July 29, 1924 as an investment company, the object of which are set out in cl. III of the Memorandum of Association and more particularly in sub-cls. 1, 2, 15 and 16 of that clause. The assessment years under review are 1943-44 to 1948-49, excepting the year 1947-48. According to its petition made in the High Court of Bombay, the petitioner company dealt with its assets as follows;

"The Petitioner Company purchased during the period 1st July 1925 to 30th June 1928 shares of the value of Rs. 1,86,47,789 major portion of which was comprised of shares in the Season Group of Mills. During the year ended 30th June 1929 the Petitioner Company promoted two companies known as Loyal Mills Ltd. and Hamilton Studios Ltd. and took over all their shares of the value of Rs. 10 1/2 lacs. In the year 1930, the Petitioner Company purchased shares of Rs. 1,33,930. During the period of 9 years from 1st July 1930 to 30th July 1939 no purchases were made with the exception of a few shares of Loyal Mills Ltd. taken over from the staff of E. D. Sassoon and Co. Ltd. who retired from service. In the year ended 30th June 1940 reconstruction scheme of the Appollo Mills Ltd., took place under which debentures held by the Petitioner Company in the Appollo Mills Ltd., were redeemed and proceeds were reinvested in the new issue of shares made by the Appollo Mills Ltd. Out of the purchases of the value of Rs. 2,794 made by the Petitioner Company during the year ended 30th June 1941 Rs. 2000/- was the value of shares of the Loyal Mills Ltd. taken over from the retiring staff. In the year ended 30th June 1943 the Petitioner Company took over from the David Mills Co. Ltd. shares of The Associated Building Co. of the value of Rs. 56,700/-. After this there were no purchases at all to this date excepting purchases of the value of Rs. 34,954 during the year ended 30th June, 1946."

The sales are contained in para. 3 (b) which may be quoted:

"In relation to the purchases made by the Petitioner company as stated above no appreciable sales of shares were made during the period 29th July 1924 to 30th June 1942 the sales made in the year ended 30th June 1929 of the value of Rs. 1,29,333 included shares of the value of Rs. 45,000 in the Loyal Mills Ltd. sold to the members of the staff and shares of the value of Rs. 43,833 representing sterling investments handed over to the creditors of the Petitioner Company in part repayment of the loan taken from them in the year ended 30th June 1931 shares of the value of Rs. 7,48,356 were handed over to the creditors in payment of the loan granted by them. From the year ended 30th June 1943 E.D. Sassoon & Co. Ltd., started relinquishing the managing agencies of the various mills under their agency and the shares held by the Petitioner Company in the Sassoon Group of Mills were handed over to the respective purchasers of the Mills agencies."

This gives the history of the acquisition and disposal of shares and also how the various transactions were entered into and why Prior to 1940 the assessee company made a claim every year for being treated as a dealer in investments and properties but this contention was consistently repelled and up to the assessment year 1939-40 the assessee company was assessed on the basis of being an investor but it appears that for the assessment year 1940-41 and the two following years 1941-42 and 1942-43 the Department accepting the plea of the assessee company treated it as a dealer in shares, securities and immovable properties and assessed it on that basis.

For these years and for the assessment year 1943-44 the company made its Return on that basis. But after the Return had been filed for the year 1943-44 the assessee company w

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