Judgment

S. K. Das, J. : This is an appeal on a certificate granted by the High Court of Bombay under S. 66A (2) of the Indian Income-tax Act, 1922. The short facts are these. The Cotton Agents Limited, Bombay are a limited liability company registered under the Indian Companies Act and will be called the assessee Company in this judgment. It held a substantial number of shares of the New Swadeshi Mills of Ahmedabad Ltd. (hereinafter called the Mills Company), Messrs. Shivnarayan Surajmal Nemani (called the Nemani group) also held a block of shares of the Mills Company along with its managing agency. The assessment year was 1946-1947, and the year ending with Diwali, 1945 (October 18, 1944 to November 4, 1945) was the accounting year. Sometime in 1944 some differences arose between the assessee Company and the Nemani group; these differences were referred to one Govindram Seksaria, who decided that the Nemani group should sell its block of shares to the assessee Company at an agreed price. It was further decided that a sum of Rs. 5,00,000 be paid by the assessee Company to the Nemani group as the price of the managing agency rights. This arrangement was approved by the share-holders