Dipak Kumar Sen, J.
1. This reference is under Section 256(1) of the Income-tax Act, 1961, is at the instance of the revenue, the relevant assessment year is 1963-64, the corresponding previous year ending is 31st December, 1962. The assessee is one M/s. Central Kurkhend Coal Co. Ltd. The facts which have been found and/or are matters of record may be shortly set out as follows :
2. On the 17th January, 1962, the assessee purchased 7,000 unquoted shares of one Parshva Properties Ltd. for a consideration of Rs. 7,17,500 at the rate of Rs. 102'50 per share. Bank charges amounting to Rs. 387 were incurred in the process, the total cost amounting to Rs. 7,17,887.
3. Dividend was declared shortly after the purchase by the said company at the rate of Rs. 31.20 per share and the assessee received from its purchase a gross dividend of Rs. 2,18,400. Tax amounting to Rs. 65,520 was deducted from this gross dividend and accordingly the net dividend amounted to Rs. 1,52,880. Between 3rd March and 19th March, 1962, the assessee sold all the 7,000 shares at prices varying from Rs. 95 to Rs. 96. The total amount realised by the assessee on such sale was Rs. 6,61,485, thus incurring a loss of Rs. 56,402. Taking into account the dividend received, a profit of Rs. 96,800 was made by the assessee in the entire transaction.
4. In the relevant assessment the Income-tax Officer considered theincome received as dividend under the head ' Other sources ' and treatedthe loss of Rs. 56,402 as a capital loss as according to him the business ofthe assessee did not consist in purchase and sale of shares and the shareshad never been the stock-in-trade of the assessee.
5. Being aggrieved by the assessment the assessee preferred an appeal before the Appellate Assistant Commissioner who upheld the contentions of the assessee and directed the loss suffered by the assessee arising out of the safe of the shares as revenue loss.
6. From this order of the Appellate Assistant Commissioner there was a further appeal by the revenue before the Tribunal. The Tribunal agreed with the finding of the Appellate Assistant Commissioner and held that the loss on the sale of shares was of a revenue nature. The Tribunal dismissed the appeal preferred by the revenue. From this order of the Tribunal the following question has been referred for our consideration :
' Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the loss of Rs. 56,402 arising from the sale of shares was of revenue nature '
7. No one appeared on behalf of the assessee at the hearing. Mr. Suhas Sen, learned counsel for the revenue, has contended before us that in the facts and circumstances of this case the transaction by the assessee in respect of the said shares cannot be held to be an adventure in the nature of trade and, therefore, the loss arising therefrom cannot be treated as a revenue loss. Mr. Sen relied on the following facts which according to him would go to show that the transaction in question was a transaction other than a transaction in the nature of business or trade :
(a) The assessee is a colliery company and it cannot be the regular or usual business of the assessee to deal in shares.
(b) The transaction in question was an isolated transaction on unquoted shares.
(c) The company whose shares were purchased and the assessee both belong to the same group of companies, namely, Sahu Jain concern.
(d) The ostensible object for the sale of the shares was to pay off the dues of the company.
(e) At no time the shares were transferred in the name of the assessee but stood registered in the name of the Punjab National Bank.
8. In support of his contentions Mr. Sen has cited several decisions which we shall consider in their chronological order.
9. The first cited was Radha Debi Jalan v. Commissioner of Income-tax : 20ITR176(Cal) . Here the question posed before the Division Bench of this court was whether a sum realised by the assessee from the sale of certain shares in excess of the purchase price was an income from business. In answering this question the court considered the effect of isolated transactions and to what extent such transactions could be held to be in the nature of business or trade. The test laid down ultimately in the judgment was whether there was any intention to turn the commodity over for the purpose of making profit and was there any activity applied to the commodity 'which was in the nature of trade.
10. Next cited was a decision of the Supreme Court in the case of G. Venkataswami Naidu & Co. v. Commissioner of Income-tax 0065/1958 : 35ITR594(SC) . Here again the Supreme Court discussed the characteristics of isolated transactions in the context whether such transactions could be held to be in the nature of trade or not. The observations of the Supreme Court are, inter alia, as follows (pages 609-610) :
' Generally speaking, it would not be difficult to decide whether a given transaction is an adventure in the nature of trade or not. It is the cases on the border line that cause difficulty. If a person invests money in land intending to hold it, enjoys its income for some time, and then sells it at a profit, it would be a clear case of capital accretion and not profit derived from an adventure in the nature of trade. Cases of realisation of investments consisting of purchase and resale, though profitable, are clearly outside the domain of adventures in the nature of trade. In deciding the character of such transactions several factors are treated as relevant. Was the purchaser a trader and were the purchase of the commodity and its resale allied to his usual trade or business or incidental to it Affirmative answers to these questions may furnish relevant data for determining the character of the transaction. What is the nature of the commodity purchased and resold and in what quantity was it purchased and resold If the commodity purchased is generally the subject-matter of trade, and if it is purchased in very large quantities, it would tend to eliminate the possibility of investment for personal use, possession or enjoyment. Did the purchaser by any act subsequent to the purchase improve the quality of the commodity purchased and thereby made it more readily resaleable. What were the incidents associated with the purchase and resale Were they similar to the operations usually associated with trade or business Are the transactions of purchase and sale repeated ?...... In considering these decisions it would be necessary to remember that they do not purport to lay down any general or universal test. The presence of all the relevant circumstances mentioned in any one of them may help the court to draw a similar inference ; but it is not a matter of merely counting the number of facts and circumstances pro and con ; what is important to consider is their distinctive character. In each case, it is the total effect of all relevant factors and circumstances that determines the character of the transaction ; and so, though we may attempt to derive some assistance from decisions bearing on this point, we cannot seek to deduce any rule from them and mechanically apply it to the facts before us.
In this connection it would be relevant to refer to another test which is sometimes applied in determining the character of the transaction. Was the purchase made with the intention to resell it at a profit It is often said that a transaction of purchase followed by resale can either be an investment or an adventure in the nature of trade. There is no middle course and no half-way house......Cases may, however, arise where the purchase has been made solely and exclusively with the intention to resell at a profit and the purchaser has no intention of holding the property for himself or otherwise enjoying or using it. The presence of such an intention is no doubt a relevant factor and, unless it is offset by the presence of other factors, it would raise a strong presumption that the transaction is an adventure in the nature of trade. Even so, the presumption is not conclusive; and it is conceivable that, on considering all the facts and circumstances in the case, the court may, despite the said initial intention, be inclined to hold that the transaction was not an adventure in the nature of trade. We thus come back to the same position and that is that the decision about the character of a transaction in the context cannot be based solely on the application of any abstract rule, principle or test and must in every case depend upon all the relevant facts and circumstances.'
11. Another decision of the Supreme Court, namely, Saroj Kumar Mazumdar v. Commissioner of Income-tax : 37ITR242(SC) was also cited by Mr. Sen. The Supreme Court in this case after considering the relevant and illustrative cases on the point, including the case of G. Venkataswami Naidu & Co. 0065/1958 : 35ITR594(SC) , held that the line of demarcation between case of isolated transactions of purchase and sale being ventures in the nature of trade, and those which are not such ventures was very thin. The Supreme Court considered the facts before it in that case and decided ultimately in the manner as follows (page 254):
' In all the circumstances of this case, the total impression created on our mind is that it has not been made out by the department that the dominant intention of the appellant was to embark on a venture in the nature of trade, when he entered into the agreement which resulted in the profits sought to be taxed. '
12. Last cited was Raja Bahadur Kamakhya Narain Singh v. Commissioner of Income-tax : 77ITR253(SC) . In this case, the Supreme Court again considered the expression ' adventure in the nature of trade ' and observed as follows :
' Since the expression ' adventure in the nature of trade ' implies the existence of certain elements in the transactions which in law would invest them with the character of trade or business and the question on that account becomes a mixed question of law and fact, the court can review the Tribunal's finding if it has misdirected itself in law.
It is fairly clear that where a person in selling his investment realises an enhanced price, the excess over his purchase price is not profit assessable to tax. But if would be so, if what is done is not a mere* realisation of the investment but an act done of making profits. The distinction between, the two types of transactions is not always easy to make. Whether the transaction is of one kind or the other depends on the question whether the excess was an enhancement of the value by realising a security or a gain in an operation of profit-making. If the transaction is in the ordinary line of the assessee's business there would hardly be any difficulty in concluding that it was a trading transaction, but where it is not, the facts must be properly assessed to discover whether it was in the nature of trade. The surplus realised on the sale of shares, for instance, would be capital if the assessee is an ordinary investor realising his holding ; but it would be revenue, if he deals with them as an adventure in the nature of trade. The fact that the original purchase was made with the intention to resell if an enhanced price could be obtained is by itself not enough but in conjunction with the conduct of the assessee and other circumstances it may point to the trading character of the transaction. For instance, an assessee may invest his capital in shares with the intention to resell them if in future their sale may bring in a higher price. Such an investment, though motivated by a possibility of enhanced value, does not render the investment a transaction in the nature of trade. The test often applied is, has the assessee made his shares and securities the stock-in-trade of a business. '
13. From the law as cited above it appears to us that whether an isolated transaction will be held to be an adventure in the nature of trade or not will depend upon the facts and circumstances of each case. Apart from the points of fact which have been emphasised by Mr. Sen on behalf of the revenue, the following factual aspects of this case are necessary to be considered in order to answer the question referred. The assessee is a limited company incorporated under the Companies Act. As an artificial juristic person, the assessee can only have one of the two objects in respect of transactions entered into by it. One object may be a trade or transaction in the nature of trade or as an investment. There normally cannot be any other personal object in acquiring or holding or dealing with any asset or any property of a limited company. Secondly, it is to be noted that the shares in question were purchased cum-dividend and a high dividend were declared shortly after the purchase. It is not disputed that the assessee belongs to the same group of companies of which the company whose shares were purchased did belong. Therefore, it was possible for the assessee to have some information in advance regarding the dividend that would be declared. The fact that the shares all along stood in the name of the bank and not in the name of the assessee would go to show that it was not the intention of the assessee to continue to hold the shares for a long time. The fact that the shares were sold with the ostensible object that the assessee required money to pay off the loan by itself does not indicate the primary object of the assessee in acquiring the said shares. This cannot by itself lead to any inescapable conclusion that it was the object of the assessee to continue to hold the shares on a long-term basis as an investment.
14. On the entirety of the facts and circumstances, an overall impression is left that it was the object of the assessee to make a quick profit by way of dividends by the purchase of shares immediately after the declaration of dividend and nothing else.
15. In that view of the matter, we have to answer the question in the affirmative and against the revenue. The matter being unopposed, there will be no order as to costs.
C.K. Banerji, J.
16. I agree.