T.P. Mukerjee, J.
1. This is a reference made by the Appellate Tribunal under Section 66(1) of the Indian Income-tax Act, 1922, hereinafter referred to as 'the Act'. The statement of the case relates to the assessment year 1959-60, the corresponding previous year being the period from the 1st May, 1957, to the 30th April, 1958.
2. The assessee, who is the applicant in this case, is a private limited company. It acquired 10,000 shares of Messrs. Ranapur Commercial Corporation Ltd., hereinafter referred to as ' the managed-company ' in the year 1945, for the value of Rs. 5 each. In the same year the assessee-company acquired the managing agency of the managed-company. On the 20th of January, 1958, the assessee-company applied for transfer of the entire lot of 10,000 shares to Messrs. Oriental Engineering and Commercial Corporation, Calcutta, and eventually transferred the entire lot of shares on the 7th March, 1958. The sale was made at the rate of Rs. 4.25 per share to the said Messrs. Oriental Engineering and Commercial Corporation, Calcutta. $ Shortly after the said transfer on April 18, 1953, the managed-company became amalgamated with the assessee-company. In the balance-sheet of the assessee-company as on April 30, 1958, the 10,000 shares of the managed-company were shown as investments.
3. Consequent on the sale of the 10,000 shares to Messrs. Oriental Engineering and Commercial Corporation, Calcutta, on March 7, 1958, the assessee-company suffered a loss of Rs. 7,500. The assessee-company claimed deduction in respect of this loss in its assessment for the relevant assessment year 1959-60. The assessee contended that this was a revenue loss and was, therefore, deductible in the computation of its total business profits. The Income-tax Officer rejected the claim of the assessee and held that the loss was in the nature of a capital loss.
4. When the case went to the Appellate Assistant Commissioner in appeal, he took a different view. The Appellate Assistant Commissioner found that the memorandum of association of the assessee-company authorised it to deal in shares. The Appellate Assistant Commissioner also found that the assessee-company had sold all the shares on the 31st of March, 1957, and again purchased shares of other companies on the 15th of April, 1957. He also referred to the fact that the Income-tax Officer himself had treated the assessee-company as a dealer in shares in the assessment for the year 1961-62. On these considerations the Appellate Assistant Commissioner was of the view that dealings in shares formed part of the assessee's regular business and, therefore, the loss in question was a revenue loss. The Appellate Assistant Commissioner, therefore, allowed the sum of Rs. 7,500 as an admissible deduction.
5. Against the order of the Appellate Assistant Commissioner an appeal was preferred by the Income-tax Officer before the Appellate Tribunal. The Appellate Tribunal found that the crucial question for determination was whether the assessee was a dealer in shares. The Tribunal found that quite a lot of shares were acquired by the assessee during the accounting years from 1945-46 to 1958-59 and it was only in the relevant year of account that the first sale of any shares took place. The Tribunal also noted the fact that simultaneously with the sale of the shares in question the assessee-company acquired the managing agency of the managed-company and it also found that the transfer of the shares, which was made on the 7th of March, 1958, took place shortly before the amalgamation of the assessee-company with the managed-company. Further, the Tribunal referred to the fact that the assessee-company had itself shown the acquisition of the shares as investments in its balance-sheet and not as its stock-in-trade. On these facts the Tribunal came to the conclusion that the loss sustained by the assessee on sale of the shares was in the nature of a capital loss not allowably as a deduction from the business profits. The Tribunal, therefore, rejected the claim of the assessee on this point, and hence, this reference.
6. The question which the Tribunal has referred to this court at the instance of the assessee-company is as follows :
' Whether, on the facts and in the circumstances of the case, ike finding that the amount of Rs. 7,500 is a capital loss is in law justified ?'
7. It would appear that there is some divergence in the statement of facts in the orders of the Appellate Assistant Commissioner and the Appellate Tribunal. According to the Appellate Assistant Commissioner, the assessee had sold all the shares on the 31st of March, 1957, and again purchased shares of other companies on the 15th of April, 1957. The Tribunal, however, found that the assessee had been acquiring shares year after year from the accounting year 1945-46 to 1958-59 and the first sale of any shares took place in the accounting year under appeal. According to the facts found by the Tribunal, therefore, there was no sale of any shares on the 31st of March, 1957, as found by the Appellate Assistant Commissioner. Mr. V. Swarup, appearing for the assessee-applicant, contended that in view of this divergence a supplementary statement might be called for from the Tribunal under Section 66(4) of the Act. We do not, however, see that any useful purpose would be served by doing so. In the first place, Mr. Swarup does not dispute the fact that so far as the shares in question are concerned they were acquired in the year 1945, and they were sold for the first time on the 7th of March, 1958. He admits that they had not been sold on the 31st of March, 1957. Even if it is held, as found by the Appellate Assistant Commissioner, that the assessee had sold all other shares on the 31st of March, 1957, it is clear that so far as the 10,000 shares of Messrs. Rampur Commercial Corporation Ltd. are concerned there was, admittedly, no sale on that date. The finding of the Appellate Assistant Commissioner in point, therefore, refers to shares other than the shares in question. Hence, even if it is conceded that the Appellate Assistant Commissioner was correct in holding that dealing in shares constituted a part of the assessee's regular business activities, the question would still remain as to whether the 10,000 shares of Messrs. Rampur Commercial Corporation Ltd. were sold by the assessee in the course of its business of dealing in shares.
8. In our opinion the Tribunal was perfectly justified in holding that the shares in question were held by the assessee as investments and not as stock-in-trade and, therefore, the loss arising on the sales thereof was a capital loss and was not, therefore, an admissible deduction from the business profits. In the first place, these shares, at any rate, were not sold during the period of about 13 years after they had been acquired. Moreover, the shares were acquired, evidently, with the object of acquiring the managing agency of the managed-company. In the case of Kishan Prasad and Co. v. Commissioner of Income-tax, (1955] 27 I.T.R. 49 (S.C.), the Supreme Court held, in a similar case, that shares purchased by the assessee for three lakhs of rupees to acquire the managing agency of a sugar mill was in the nature of an investment. In that case also, as in the present case, the memorandum of association of the assessee-company authorised it to deal in shares and other securities. The Supreme Court observed that the circumstance as to whether a transaction is or is not within the company's powers has no bearing on the nature of the transaction or on the question whether the profits arising therefrom are capital acquisition or revenue income. To the same effect is the decision of the Supreme Court in another case, Oriental Investment Co. Ltd. v. Commissioner of Income-tax,  32 I.T.R. 664 (S.C.), In that case it was held that the mere fact that a company has within its object the dealing in investment in shares does not necessarily give to the company the characteristics of a dealer in shares. In the present case, therefore, the fact that the memorandum of association of the assessee-company permitted it to deal in purchase and sale of shares is not conclusive of the fact that it was dealing in shares in so far as this particular transaction is concerned. In the case of Sardar Indra Singh and Sons Ltd. v. Commissioner of Income-tax,  24 I.T.R. 415 (S.C.), the Supreme Court pointed out that the surplus resulting from the sale of shares could be assessable to tax if such sales were effected in the usual course of carrying on the business of the assessee or if such sales were a normal step in the realisation of securities in the process of carrying on of the assessee's business.
9. In view of the fact, as pointed out by the Tribunal, that the shares in question were acquired for the sake of obtaining the managing agency of the managed-company and they were sold shortly before its amalgamation with the managed company it cannot be held that the sales were made in the normal course of the assessee's business as a dealer in shares, even if it is held that the assessee was at all a regular dealer in shares. Moreover, as the assessee had itself shown in its balance-sheet as on April 30, 1958, the shares were held as investments. All these facts are clearly conclusive of the question that the loss sustained by the assessee in the sale of the shares was a capital loss and it cannot be treated as a revenue loss deductible in the computation of its business profits for the relevant year.
10. Our answer to the question referred is, therefore, in the affirmative and against the assessee.
11. The assessee will pay to the Commissioner of Income-tax, U. P. Rs. 200 as costs of this reference.