JUDGMENT

SABYASACHI MUKHARJI, J.:— These appeals by certificate arise from the judgment and decision of the High Court of Bombay dated 10th August, 1971 in Income-tax Reference No. 124 of 1963 (reported in 1973 Tax LR 314).

2. The question involved in these appeals is familiar in direct tax laws. The points in controversy are short. But the adjudication is pending for long. Assessment years involved are 1957-58 and 1958-59. The High Court disposed of these references on 10th August, 1971 and in 1986, i.e., nearly after 28 years of the years of assessment we are posed with the question whether in respect of certain transactions in those years the assessee was a dealer or an investor and consequentially whether the income arising from the sale of shares by the assessee is to be taxed on revenue account or capital account.

3. The question that the High Court had to answer was as follows :

"Whether, on the facts and in the circumstances of the case, the assessee was a dealer in shares in the accounting periods relevant to the assessment years 1959-60 and 1960-61?"

4. The said question was referred by the Tribunal to the High Court at the instance of the assessee.

5. The assessee, H. Holck Larsen, was a partner in the firm of M/s. Larsen & Toubro (hereinafter referred to as the said company) up to 1946. On 8th Feb. 1946/7th Feb. 1946, that partnership was converted into a private limited company of the same name. In consideration of his interest in the firm, the assessee was allotted shares of the company. Against payment of cash, the assessee got 1875 equity shares and against his interest in the partnership firm, he got 53,486 equity shares. During the next few accounting years up to the financial year 1953-54, the assessee acquired 2,994 shares of the said company and sold 1,550 shares. According to the statement of the case, the purchases and sales of shares of the said company were few and far between up to the financial year 1953-54, but these became larger in number and at close intervals in the next few succeeding years. The chart would indicate the position in this respect.

(1) (2) (3) (4) (5)

Financial year ending No. of shares acquired Value No. of shares sold Sale price

(Rs.) (Rs.)

31-3-1955 - - - - - - 4,600 51,173

31-3-1956 6,111 61,110 13,955 1,88,433

31-3-1957 6,102 61,020 7,661 1,24,406

31-3-1958 1,256 12,560 5,050 63,721

31-3-1959 5,500 55,000 5,200 87,810

31-3-1960 11,000 1,11,000 10,400 2,45,732

6. During the years mentioned in the chart, the assessee had acquired 29,969 shares of the said company and sold 37.366 shares thereby making a profit of Rs. 1,65,581/-. Besides purchasing and selling equity shares of the said company, the assessee had also dealt in preference shares of the said company. The assessee had sold shares of Andhra Cement Co. in the financial year 1954-55, made purchases of shares of SCC and ICC in the years 1955-56, 1956-57 and 1958-59 and also of shares of India Cement Co. and National Carbon in 1955-56 and also sold shares of Guest Keen Williams and Indian Cement in 1958-59. During all these years the purchases and sales of equity shares of the said company were more marked than the purchase and sale of other shares. Besides the sale of equity shares of the said company and shares of other companies stated above, the assessee had also sold some of his original shares of the said company held by him.

7. On these facts the assessee contended before the Income-tax Officer that the assessee was only an investor and not a dealer in shares but this contention was rejected by the Income-tax Officer and the Appellate Assistant Commissioner.

8. Aggrieved by the said decision of the Appellate Assistant Commissioner, the assessee filed second appeal before the Tribunal. Before the Tribunal it was contended on behalf of the assessee (1) that the assessee never purchased equity shares of the said company from any outsider or any stranger except in a few cases from close friends or from members of the staff just