DCIT, Hyderabad v. Esbee Holdings Pvt. Ltd., Hyderabad

ITA 1155/HYD/2003 | 2000-2001
Pronouncement Date: 31-03-2010 | Result: Partly Allowed

Appeal Details

RSA Number 115522514 RSA 2003
Assessee PAN AAACE4388A
Bench Hyderabad
Appeal Number ITA 1155/HYD/2003
Duration Of Justice 6 year(s) 5 month(s) 9 day(s)
Appellant DCIT, Hyderabad
Respondent Esbee Holdings Pvt. Ltd., Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 31-03-2010
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 31-03-2010
Assessment Year 2000-2001
Appeal Filed On 22-10-2003
Judgment Text
IN THE INCOME-TAX APPELLATE TRIBUNAL HYDERABAD BENCH 'A' BEFORE SHRI N.R.S.GANESAN AND SHRI CHANDRA POOJARI I.T.A.NO.1155/HYD/2003 ASSESSMENT YEAR 2000-01 DY. CIT CIRCLE 1(3) HYDERABAD. ..APPELLANT VERSUS ESBEE HOLDINGS PVT. LTD. HYDERABAD. ..RESPONDENT (PAN AAACE4388A) APPELLANT BY : SHRI K.GNANA PRAKASH RESPONDENT BY : SHRI S.RAVI & SHRI A.V.RAGHURAM O R D E R PER N.R.S.GANESAN JUDICIAL MEMBER: THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT (APPEALS) II HYDERABAD DATED 27-8-2003 AND PERTA INS TO ASST. YEAR 2000-01. 2. SHRI K.GNANA PRAKASH LEARNED DEPARTMENTAL REPRE SENTATIVE SUBMITTED THAT THE ONLY ISSUE THAT ARISES FOR CONSIDERATION I N THIS APPEAL IS WHETHER THE PURCHASE AND SALE OF SHARES IS A BUSINESS TRANSACTI ON OR THE PROFIT IS A CAPITAL GAIN. ACCORDING TO THE LEARNED DEPARTMENTAL REPRESE NTATIVE THE ASSESSING OFFICER TREATED THE SALE AND PURCHASE AS A BUSINESS TRANSACTION AND TAXED THE PROFIT ON THE SALE OF SHARES AS BUSINESS INCOME. HO WEVER THE CIT (A) FOUND THAT THE PROFIT ON SALE OF SHARES HAS TO BE TREATED AS CAPITAL GAIN. ACCORDING TO THE LEARNED DEPARTMENTAL REPRESENTATIVE THE ASSESS EE IS IN THE BUSINESS OF PURCHASE AND SALE OF SHARES. FOR THE ASST. YEAR UND ER CONSIDERATION THE ASSESSEE SOLD 48 16 550 SHARES OF SHEZ CEMENTS LTD. FOR A CONSIDERATION OF RS.10 67 15 000. THE COST OF ACQUISITION OF THESE S HARES WAS SATED TO BE 2 RS.2 93 03 800. THE LEARNED DEPARTMENTAL REPRESENTA TIVE SUBMITTED THAT THE BUSINESS OF THE ASSESSEE ADMITTEDLY TRADING IN SHAR ES STOCKS AND INVESTMENTS. ACCORDING TO THE LEARNED DEPARTMENTAL REPRESENTATIV E THE INTENTION OF THE ASSESSEE WAS TO TRADE IN SHARES AT THE TIME OF PURC HASE. THE ASSESSEE INVESTED IN THE SHARES AFTER BORROWING WORKING CAPITAL FROM CANARA BANK AND BOMBAY MERCANTILE CO-OPERATIVE BANK AGAINST HYPOTHECATION OF STOCKS AND SHARES. THEREFORE THE INTENTION IS VERY CLEAR AT THE TIME OF PURCHASE. THE LEARNED DEPARTMENTAL REPRESENTATIVE FURTHER SUBMITTED THAT THE ASSESSEE CLAIMED THE INTEREST ON THE BORROWED FUNDS AS BUSINESS EXPENDIT URE IN THE PROFIT AND LOSS ACCOUNT. MOREOVER THE RESULTANT LOSS WAS TREATED A S BUSINESS LOSS IN THE RETURN OF INCOME WHICH CLEARLY SHOWS THAT THERE WAS AN INT ENTION TO MAKE PROFIT IN SALE AND PURCHASE OF SHARES. THEREFORE ACCORDING TO THE LEARNED DEPARTMENTAL REPRESENTATIVE THE CIT (A) IS NOT CORRECT IN CONCL UDING THAT THE PROFIT WAS CAPITAL GAIN. 3. ON THE CONTRARY SHRI S.RAVI LEARNED SENIOR COU NSEL FOR THE ASSESSEE SUBMITTED THAT NO DOUBT THE ASSESSEE-COMPANY WAS IN CORPORATED AS INVESTMENT HOLDING COMPANY. THE CHAIRMAN OF THE COMPANY IS MRS . SYED BADURDDIN. ACCORDING TO THE LEARNED SENIOR COUNSEL BETWEEN 19 83 AND 1989 THERE WAS HARDLY ANY ACTIVITY IN SHEZ CHEMICALS LTD. SHRI SYE D BADRUDDIN INTENDED TO INVOLVE A FOREIGN COLLABORATOR FOR MANUFACTURE OF C HEMICALS. HOWEVER DUE TO GOVERNMENT POLICY PREVAILING AT THAT TIME THE PROM OTER COULD NOT FIND ANY FOREIGN COLLABORATOR. ACCORDING TO THE LEARNED SENI OR COUNSEL AS AN ALTERNATIVE HE INTENDED TO PUT UP A CEMENT PLANT WITH FOREIGN C OLLABORATION. SOMETIME IN THE YEAR 1985 THE LICENCES WERE OBTAINED TO PUT UP A CEMENT PLANT AND 3 CONSEQUENTLY SHEZ CHEMICAL LTD. WAS CHANGED TO SHEZ CEMENTS LTD. THE WORK WAS COMMENCED IN THE YEAR 1991 TO SET UP THE CEMENT FACTORY AND THE COMPANY WENT INTO PUBLIC ISSUE OF RS.4.53 CRORES IN THE YEAR 1993. ORIGINALLY IT WAS PLANNED THAT THE PLANT WOULD BE ERECTED TO MANU FACTURE 300 TONNES PER DAY. HOWEVER THE CAPACITY WAS LATER INCREASED TO 4 00 TONNES PER DAY. SINCE THE COST OF ERECTION OF THE CEMENT PLANT INCREASED DUE TO EFFLUX OF TIME SHEZ CEMENTS LTD. NEEDED FURTHER FUNDS TO MEET THE INCRE ASED COST. ACCORDINGLY RIGHTS SHARES WERE ISSUED IN THE YEAR 1995. AT THAT TIME IT WAS DECIDED INSTEAD OF HOLDING THE SHARES DIRECTLY IN THE NAME OF SHRI SYED BADRUDDIN AND HIS FAMILY MEMBERS TO HOLD THE SAME IN THE NAME OF A HOLDING COMPANY WHICH WILL GIVE ADDITIONAL FUNDS. ACCORDINGLY THE ASSESSEE COMPANY ACQUIRED FURTHER SHARES. REFERRING TO THE SHARE-HOLDING PATTERN OF THE ASSES SEE COMPANY THE LEARNED SENIOR COUNSEL SUBMITTED THAT THE ENTIRE SHARES OF THE ASSESSEE COMPANY WERE HELD BY SHRI SYED BADRUDDIN AND HIS FAMILY MEMBERS. RIGHTS SHARE WERE ISSUED BY SHEZ CEMENTS LTD. IN THE YEAR 1995. THE RIGHTS S HARES WERE SUBSCRIBED TO IN THE NAME OF THE ASSESSEE COMPANY INSTEAD OF SHRI SY ED BADRUDDIN AND HIS FAMILY MEMBERS. THEREFORE FROM THE VERY BEGINNING THE ASSESSEE PURCHASED THE HARES OF SHEZ CEMENTS LTD. IN ORDER TO HAVE A C ONTROL OVER THE COMPANY AS A HOLDING COMPANY. THOUGH THE ASSESSEE WAS INCORPOR ATED FOR THE PURPOSE OF PURCHASE AND SALE OF SHARES AS FAR AS SHEZ CEMENTS LTD. IS CONCERNED THE ASSESSEE HAD ONLY PURCHASED THE SHARES AND IT NEVER SOLD ANY SHARES AT ANY POINT OF TIME. THEREFORE THE INTENTION OF THE ASSE SSEE WAS TO HOLD THE SHARES AS AN INVESTMENT IN ORDER TO HAVE CONTROL OVER SHEZ CE MENTS LTD. EXPLAINING THE CIRCUMSTANCES UNDER WHICH THE INVESTMENT WAS MADE B Y THE ASSESSEE COMPANY 4 IN THE SHARES OF SHEZ CEMENTS LTD. THE LEARNED SEN IOR COUNSEL SUBMITTED THAT THE ASSESSEE COMPANY CQUIRED 54 44 550 SHARES OF SH EZ CHEMICALS LTD. FROM 31-3-1994 TO 31-3-2000. THESE SHARES WERE ACQUIRED ONLY FOR THE PURPOSE OF RETAINING THE SAME AS INVESTMENT IN ORDER TO HAVE C ONTROL OVER SHEZ CEMENTS LTD. ACCORDING TO THE LEARNED SENIOR COUNSEL THE A SSESSEE COMPANY NEVER INTENDED TO SELL THE SHARES OF SHEZ CEMENTS LTD. AT THE TIME OF INVESTMENT. 4. SHRI RAVI LEARNED SENIOR COUNSEL FOR THE ASSESS EE FURTHER SUBMITTED THAT THE PROMOTER SHRI SYED BADRUDDIN AND HIS FAMILY MEM BERS INTENDED TO RUN THE CEMENT PLANT. HOWEVER DUE TO SOME DELAY THERE WAS OVER-COST IN ERECTING THE CEMENT PLANT. THE STATE BANK OF INDIA WHICH SANCTI ONED THE WORKING CAPITAL WITHDREW ITS COMMITMENT. SHEZ CEMENTS LTD. WAS INCU RRING HUGE LOSSES DUE TO INTEREST BURDEN AND FINANCIAL INSTITUTION STEPPED I NTO THE PICTURE. IN THOSE CIRCUMSTANCES SHEZ CEMENTS LTD. WAS PRESSURIZED BY THE FINANCIAL INSTITUTION TO TAKE A FINANCIALLY SOUND PARTNER AS PROMOTER OR TO EXERCISE THEIR OPTION AND CHANGE THE MANAGEMENT AS PER THEIR RIGHT UNDER THE LOAN AGREEMENT. THE FINANCIAL INSTITUTION PREVAILED OVER THE PROMOTER T O TRANSFER THEIR SHARES AND TO CHANGE THE MANAGEMENT. THEREFORE SHRI SYED BADRUDD IN APPROACHED ONE SHRI K.V.VISHNU RAJU OF RAASI GROUP OF COMPANIES TO PAR TICIPATE IN THE MANAGEMENT AND TAKE OVER THE COMPANY. THEREFORE THE ASSESSEE COMPANY WAS FORCED TO SELL SOME OF THE SHARES OF SHEZ CEMENTS LTD. IN THAT FAC TUAL SITUATION THE PROFIT ON SALE OF SHARES OF SHEZ CEMENTS LTD. IS ONLY A CAPIT AL GAIN AND NOT BUSINESS INCOME. REFERRING TO THE JUDGMENT OF THE APEX COURT IN THE CASE OF DALHOUSIE INVESTMENT TRUST CO. LTD. V. CIT 68 ITR 486 THE L EARNED SENIOR COUNSEL SUBMITTED THAT THIS JUDGMENT IS NOT APPLICABLE TO T HE FACTS OF THIS CASE. THE 5 INTENTION AT THE TIME OF ACQUISITION HAS TO BE SEEN . REFERRING TO THE FACTUAL SITUATION AS NARRATED BY THE CIT (A) THE LEARNED S ENIOR COUNSEL SUBMITTED THAT THE INTENTION OF THE ASSESSEE IN INVESTING IN SHEZ CEMENTS LTD. IS ONLY TO HOLD THE SHARES AS INVESTMENT FOR THE PURPOSE OF CONTROL LING THE CEMENT COMPANY. THEREFORE THE INTENTION OF THE ASSESSEE COMPANY AT THE TIME OF ACQUISITION IS ONLY TO HOLD THE SHARES AS CAPITAL INVESTMENT. REFE RRING TO THE JUDGMENT OF THE APEX COURT IN THE CASE OF CIT V. SUTLEJ COTTON MILL S SUPPLY AGENCY LTD. 100 ITR 706 THE LEARNED SENIOR COUNSEL SUBMITTED THAT INTE NTION TO RE-SELL THE SHARES IS ABSENT IN THE CASE BEFORE US. THE SHARES WERE SOLD ONLY BECAUSE OF COMPELLING CIRCUMSTANCES. THE FINANCIAL INSTITUTION PRESSURIZE D SHEZ CEMENTS LTD. TO TAKE A FINANCIALLY SOUND PARTNER AS A PROMOTER. THEREFORE THE ASSESSEE HAD TO PART WITH SOME OF THE SHARES AS HOLDING COMPANY TO PAVE THE WAY FOR A PARTNER TO JOIN AS PROMOTER. THEREFORE THE PROFIT ARISING OUT OF THE TRANSACTION HAS TO BE TREATED AS CAPITAL GAIN. 5. THE LEARNED SENIOR COUNSEL PLACED HIS RELIANCE O N THE JUDGMENT OF THE APEX COURT IN THE CASE OF CIT V. KARAM CHAND THAPAR AND BROS. P. LTD. V. CIT (1971) 82 ITR 899 AND SUBMITTED THAT WHEN THE ASSE SSEE PURCHASED THE SHARES IN THE MANAGED COMPANY AND KEPT THE SAME FOR 14 YEARS IT SHOWED THAT THE ASSESSEE HAD SHOWN THE INVESTMENT IN SHARES AS INVESTMENT AND THEREFORE THE PROFIT ARISING OUT OF SALE OF THE SHARES SHALL BE TREATED AS CAPITAL GAIN/LOSS. IN VIEW OF THIS JUDGMENT OF THE APEX COURT ACCORDI NG TO THE LEARNED COUNSEL THE PROFIT ON SALE OF SHARES HAS TO BE TREATED AS C APITAL GAIN. 6. THE LEARNED SENIOR COUNSEL ALSO PLACED RELIANCE ON THE JUDGMENT OF THE MADRAS HIGH COURT IN THE CASE OF V.S.R.M. FIRM V. C IT (1963) 47 ITR 720 AND 6 SUBMITTED THAT WHEN THE SHARES WERE PURCHASED AS AN INVESTMENT FOR THE PURPOSE OF CONTROLLING THE HOLDING COMPANY THE PRO FIT ON SALE OF SUCH SHARES HAS TO BE TREATED AS CAPITAL GIN. THE LEARNED COUNS EL ALSO PLACED HIS RELIANCE ON THE DECISION OF THE BANGALORE BENCH OF THIS TRIBUNA L IN THE CASE OF C.NIRANJAN V. ITO (1994) 47 ITD 228 (BANG.). THE LEARNED COUNSEL ALSO PLACED HIS RELIANCE ON THE JUDGMENT OF THE APEX COURT IN THE CASE OF RAMNA RAIN SONS (PR.) LTD. V. CIT (1961) 41 ITR 534 IN THE CASE OF CIT V. BAI SHIRIN BAI K. KOOKA (1962) 46 ITR 86 AND IN THE CASE OF CIT V. ASSOCIATED INDUSTRIAL DEVELOPMENT CO. (P) LTD. (1971) 82 ITR 586. 7. THE LEARNED SENIOR COUNSEL ALSO PLACED HIS RELIA NCE ON THE JUDGMENT OF THE ALLAHABAD HIGH COURT IN THE CASE OF CENTRAL INDIA A GENCIES (P) LTD. V. CIT (1970) 82 ITR 959 THE CALCUTTA HIGH COURT IN THE C ASE OF CIT V. RAM KUMAR AGARWALLA & BROS. (1977) 108 ITR 457 AND IN THE CA SE OF CIT V. CLIVE ROW INVESTMENT HOLDING CO. LTD. (1977) 107 ITR 699 AND THE JUDGMENT OF THE GUJARAT HIGH COURT IN THE CASE OF CIT V. MOHANLAL R ANCHHODDAS (1993) 203 ITR 304. 8. WE HAVE CONSIDERED RIVAL SUBMISSIONS ON EITHER S IDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ONLY ISSUE THAT A RISES FOR CONSIDERATION IS WHETHER THE PURCHASE AND SALE OF SHARES OF SHEZ CEM ENTS LTD. IS A BUSINESS TRANSANCTION OR WHETHER THE PROFIT WAS A CAPITAL GA IN. THE CONTENTION OF THE LEARNED DEPARTMENTAL REPRESENTATIVE IS THAT THE ASS ESSEE HAD DISCLOSED THE LOSS ON THE VERY SAME SHARES AS A BUSINESS LOSS IN THE E ARLIER ASSESSMENT YEAR. THE LEARNED SENIOR COUNSEL FOR THE ASSESSEE CONTENDED T HAT AS FAR AS SHEZ CEMENTS LTD. IS CONCERNED THE ASSESSEE ONLY PURCHASED THE SHARES AND NO SHARES WERE 7 SOLD IN BETWEEN. ONLY FOR THE PURPOSE OF RAISING FU NDS IN ORDER TO COMPLETE THE PROJECT OF CEMENT FACTORY THE SHARES WERE SOLD. THE REFORE ACCORDING TO THE LEARNED SENIOR COUNSEL THE ASSESSEE PURCHASED THE SHARES OF SHEZ CEMENTS LTD. AS AN INVESTMENT AS HOLDING COMPANY FOR THE PU RPOSE OF CONTROLLING AND MANAGING THE AFFAIRS OF SHEZ CEMENTS LTD. 9. WE HAVE ALSO CAREFULLY GONE THROUGH THE JUDGMENT OF THE APEX COURT IN THE CASE OF DALHOUSIE INVESTMENT TRUST CO. LTD. (SU PRA). IN THE CASE BEFORE THE APEX COURT THE PRINCIPAL ACTIVITY OF THE ASSESSEE COMPANY WAS INVESTMENT OF ITS CAPITAL IN SHARES AND STOCKS AND CONFINED ITS A CTIVITY MOSTLY TO THE SHARES OF MCLEOD AND CO. SUBSEQUENTLY THE ASSESSEE CHANGED I TS INVESTMENT BY SALE OF SHARES FROM TIME TO TIME. THE ASSESSEE PLACED NO MA TERIAL BEFORE THE TRIBUNAL AS TO THE OBJECT BEHIND ACQUISITION OF THE SHARES O F MCLEOD AND CO. THE ASSESSEE EXPLAINED THAT THE SHARES OF MCLEOD AND CO . WHICH WERE HELD AS INVESTMENT WERE SOLD BECAUSE THE CONTROL OF THE CO MPANY WENT OUT OF THE HANDS OF THE DIRECTORS. HOWEVER THE EXPLANATION OF THE ASSESSEE WAS FOUND TO BE NOT TRUE. IN THAT FACTUAL SITUATION THE APEX COU RT FOUND THAT THE ASSESSEE COMPANY DEALT WITH THE SHARES OF MCLEOD AND CO. AS STOCK-IN-TRADE AND THEY WERE IN FACT PURCHASED EVEN INITIALLY NOT AS INVEST MENT BUT FOR THE PURPOSE OF SALE AT A PROFIT. THEREFORE THE TRANSACTION AMOUNT ED TO AN ADVENTURE IN THE NATURE OF TRADE. THE APEX COURT ALSO HAS TAKEN NOTE OF THE FACT THAT THE PURPOSE OF PURCHASE OF SHARES WAS INVESTMENT AND IN VARYING THE INVESTMENT THE SALE OF THOSE SHARES RESULTED IN A PROFIT WOULD NOT MAKE T HE PROFIT REVENUE INCOME. HOWEVER THE INITIAL PURCHASE OF THE SHARES BY THE ASSESSEE WAS NOT FOR THE PURPOSE OF INVESTMENT FOR EARNING INCOME FROM DIVID ENDS BUT WITH A VIEW TO 8 EARN PROFIT BY RESALE OF THOSE SHARES. THAT WOULD B E TREATED AS AN ADVENTURE IN THE NATURE OF BUSINESS. IN FACT THE APEX COURT OBS ERVED AS FOLLOWS AT PAGES 492 AND 493 OF THE REPORT:- 'LEARNED COUNSEL ALSO REFERRED TO THE DECISION OF THIS COURT IN RAMNARAIN SONS ( PR. ) LTD. V. COMMISSIONER OF INCOME-TAX [1961] 41 I.T.R. 534 TO URGE THAT THE PRINCIPAL CONSIDERATION IN DETERMINING WHETHER INCOME FROM SALE OF SHARES IS REVENUE INCOME OR CAP ITAL GAIN IS TO FIND OUT WHAT WAS THE PURPOSE OF PURCHASE OF THOSE SHARES A ND IF THE PURPOSE WAS INVESTMENT THE FACT THAT IN VARYING THE INVES TMENT THE SALE OF THOSE SHARES RESULTED IN A PROFIT WILL NOT MAKE THAT PROF IT REVENUE INCOME. THE PRINCIPLE IS PERFECTLY CORRECT BUT IS NOT APPLICAB LE TO THE CASE BEFORE US ON THE FINDING MENTIONED BY US ABOVE THAT EVEN THE INI TIAL PURCHASE OF THESE SHARES BY THE ASSESSEE WAS NOT FOR THE PURPOSE OF I NVESTMENT FOR EARNING INCOME FROM DIVIDENDS BUT WAS WITH A VIEW TO EARN PROFIT BY RESALE OF THOSE SHARES.' IN VIEW OF THIS FINDING OF THE APEX COURT IF THE I NTENTION OF THE ASSESSEE AT THE TIME OF INITIAL PURCHASE WAS TO KEEP THE SHARES AS INVESTMENT AS A HOLDING COMPANY FOR THE PURPOSE OF CONTROLLING THE CEMENT C OMPANY THEN THE PURCHASE OF SHARES OF SHEZ CHEMICALS LTD. MAY BE AN INVESTME NT AND THE SUBSEQUENT PROFIT ARISING OUT OF THE SALE OF THE SHARES MAY BE CAPITAL GAIN. HOWEVER IT IS FOR THE ASSESSEE TO PROVE THAT THE INITIAL PURCHASE WAS MADE WITH AN INTENTION TO KEEP THE SHARES AS INVESTMENT. 10. WE HAVE ALSO CAREFULLY GONE THROUGH THE JUDGMEN T OF THE APEX COURT IN THE CASE OF KARAM CHAND THAPAR BROS. (SUPRA). IN TH E CASE BEFORE THE APEX COURT THE ASSESSEE PURCHASED 2 400 SHARES OF A COM PANY IN 1941 AND 100 SHARES IN 1950. THE ENTIRE SHARES WERE SOLD IN THE YEAR 1955 AT A LOSS. THE ASSESSEE CLAIMED THE LOSS AS A TRADING LOSS. HOWEVE R THE INCOME-TAX OFFICER FOUND THAT THE TRANSACTION WAS NOT GENUINE AND EVEN IF IT WAS TREATED AS A BUSINESS TRANSACTION THE LOSS HAS TO BE ASSESSED A S A CAPITAL LOSS. IN THAT 9 FACTUAL SITUATION THE APEX COURT FOUND THAT SINCE THE ASSESSEE KEPT THE SHARES FOR 14 YEARS WHICH IS AN UNUSUAL FEATURE IT HAS TO BE TAKEN INTO CONSIDERATION AS THE LOSS IN QUESTION WAS A CAPITAL LOSS. IN FACT THE APEX COURT OBSERVED AS FOLLOWS AT PAGES 901 AND 902 OF THE REPORT:- 'LOCKING UP OF SHARES FOR ABOUT 14 YEARS MUST BE H ELD TO BE AN UNUSUAL FEATURE IF THOSE SHARES WERE THE TRADING AS SETS OF THE ASSESSEE. THAT CIRCUMSTANCE IS MORE CONSISTENT WITH THE FACT THAT THOSE SHARES WERE INVESTMENT SHARES. NO EXPLANATION WAS OFFERED FOR N OT DEALING WITH THOSE SHARES FOR ABOUT 14 YEARS. IT IS LEAST LIKELY THAT A TRADER WOULD RETAIN HIS SHARES PURCHASED BY HIM IN 1941 TILL 1955 THOUGH HE HAD OCCASIONS TO SELL THE SAME AT A HIGHER PRICE EARLIER. IT MAY BE NOTED THAT THOUGH ACCORDING TO THE ASSESSEE THE PRICE OF THOSE SHARE S WAS RS.50 PER SHARE IN THE YEAR 1950 YET THE ASSESSEE PURCHASED 100 SH ARES IN 1950 AT RS.75 PER SHARE. THIS IS AGAIN INDICATION THAT THE ASSESS EE WAS NOT ACQUIRING THOSE SHARES AS A TRADING ACTIVITY. WE FAIL TO SEE WHY THE SHARES OF M/S. KARAM CHAND THAPAR AND SONS SHOULD HAVE GONE DOWN I N VALUE IN THE YEARS 1952-53 1953-54 AND 1954-55 WHEN THAT COMPAN Y WAS MAKING SUBSTANTIAL PROFITS. THIS CIRCUMSTANCE REMAINS UNEX PLAINED. THE TRIBUNAL ALSO RELIED ON THE CIRCUMSTANCE THAT THE ASSESSEE W AS SHOWING THESE SHARES AS INVESTMENT SHARES IN ITS BOOKS AS WELL AS IN THE BALANCE-SHEET. IT IS TRUE THAT THAT CIRCUMSTANCE BY ITSELF IS NOT A CONCLUSIVE CIRCUMSTANCE. IT CANNOT BE DENIED THAT THAT IS A RELEVANT CIRCUMS TANCE ON WHICH THE TRIBUNAL COULD HAVE RELIED FOR DRAWING THE INFERENC E IT DID. THE EXPLANATION THAT IT HAD TO DO SO BECAUSE OF THE PRO VISIONS OF THE COMPANY LAW IS UNFOUNDED. ' IN VIEW OF THIS JUDGMENT OF THE APEX COURT WE HAVE TO EXAMINE WHETHER THE ASSESSEE PURCHASED THE SHARES AND KEPT THE SAME FOR A LONG PERIOD AS INVESTMENT. IF THE ASSESSEE PURCHASED THE SHARES AN D KEPT THE SAME FOR A LONG PERIOD AS AN INVESTMENT THE LOSS/PROFIT HAS TO BE ASSESSED AS CAPITAL LOSS/PROFIT. 11. WE HAVE ALSO CAREFULLY GONE THROUGH THE JUDGMEN T OF THE APEX COURT IN THE CASE OF ASSOCIATED INDUSTRIAL DEVELOPMENT CO. P . LTD. (SUPRA). IN THE CASE BEFORE THE APEX COURT THE ASSESSEE COMPANY ACTED A S MANAGING AGENT OF 10 VARIOUS COMPANIES. THE ASSESSEE WAS TREATED AS A DE ALER IN SHARES IN EARLIER YEARS. TAKING INTO ACCOUNT THE PURCHASE AND SALE OF SHARES THE TRIBUNAL HELD THAT MULTIPLICITY OF TRANSACTIONS OVER THE YEARS SH OWED THAT THE ASSESSEE CEASED TO BE AN INVESTOR AND IT HAD BECOME A DEALER IN SHA RES. THEREFORE THE PROFIT ON SALE OF SHARES WAS HELD TO BE BUSINESS PROFIT. ON A REFERENCE TO THE HIGH COURT THE FINDING OF THE TRIBUNAL WAS UPHELD. ON FURTHER APPEAL THE APEX COURT OBSERVED THAT IT CAN HARDLY BE DISPUTED THAT THERE WAS NO BAR TO A DEALER INVESTING IN SHARES. ULTIMATELY THE APEX COURT ANS WERED THE QUESTION REFERRED IN FAVOUR OF THE REVENUE. 12. IN VIEW OF THE RATIO LAID DOWN BY THE APEX COUR T WE HAVE TO EXAMINE THE INTENTION OF THE ASSESSEE AT THE TIME OF PURCHASE O F THE SHARES AND THE PERIOD FOR WHICH THE SHARES WERE KEPT AS INVESTMENT. IN TH E CASE BEFORE US THE DETAILS OF DATES ON WHICH THE SHARES OF SHEZ CHEMICALS LTD. WERE PURCHASED AND WHEN THEY WERE SOLD ARE NOT AVAILABLE ON THE RECORD OF THIS TRIBUNAL. THE LOWER AUTHORITIES SIMPLY EXTRACTED THE PROFIT AND LOSS ON SALE OF SHARES FOR RELEVANT FINANCIAL YEAR. IT IS ALSO NOT SHOWN WHETHER ANY SH ARES OF SHEZ CEMENTS LTD. WERE SOLD DURING THE EARLIER FINANCIAL YEAR IN WHIC H THE ASSESSEE DISCLOSED PROFIT/LOSS ON SALE OF THE SHARES. THOUGH THE REVEN UE CONTENDS THAT THE ASSESSEE SOLD THE SHARES OF SHEZ CHEMICALS LTD. TH E SPECIFIC CONTENTION OF THE ASSESSEE IS THAT THE ASSESSEE ONLY PURCHASED THE SH ARES AND NO SALE WAS MADE IN THE EARLIER ASST. YEAR. IN VIEW OF THIS CONFLICT IN FACTS IN OUR OPINION THE MATTER NEEDS TO BE RE-EXAMINED BY THE AO. THE AO SH ALL BRING ON RECORD THE DATES ON WHICH THE SHARES OF SHEZ CHEMICALS LTD. WE RE PURCHASED BY THE ASSESSEE AND THE PERIOD FOR WHICH THE SAME WERE HEL D AS INVESTMENT AND 11 WHETHER ANY SHARES WERE SOLD IN THE EARLIER ASST. Y EARS. THE AO SHALL ALSO FIND OUT THE INTENTION OF THE ASSESSEE AT THE TIME OF AC QUISITION OF THE SHARES. SINCE NO MATERIAL IS AVAILABLE ON RECORD IN OUR OPINION THE MATTER NEEDS TO BE CONSIDERED BY THE AO AFRESH. ACCORDINGLY WE SET AS IDE THE ORDERS OF THE LOWER AUTHORITIES AND REMIT THE MATTER BACK TO THE FILE O F THE AO. THE AO SHALL RE- CONSIDER THE ISSUE AND BRING ON RECORD THE ENTIRE F ACTUAL POSITION AS STATED ABOVE AND THEREAFTER DECIDE THE ISSUE AFRESH IN ACC ORDANCE WITH LAW AFTER GIVING A REASONABLE OPPORTUNITY TO THE ASSESSEE. 13. IN THE RESULT THE APPEAL OF THE REVENUE IS ALL OWED FOR STATISTICAL PURPOSES. PRONOUNCED IN OPEN COU RT ON 31.03.2010 SD/- SD/- (CHANDRA POOJARI) (N.R.S.GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD 31ST MARCH 2010. RRRAO. COPY OF THE ORDER FORWARDED TO:- 1. ESBEE HOLDINGS (P) LTD. 8-2-684/3/46 BANJARA HILL S HYDERABAD. 2. DY. CIT CIRCLE 1(3) HYDERABAD. 3. CIT I HYDERABAD. 4. CIT (A) II HYDERABAD. 5. DR ITAT HYDERABAD.