| Case ID |
f72fe66e-d9d5-4a3f-b7a3-f1c72f7189bd |
| Body |
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| Case Number |
IT REFERENCE No. 242 OF 1970 |
| Decision Date |
Dec 03, 1976 |
| Hearing Date |
|
| Decision |
The Supreme Court upheld that the surplus realized on the sale of rights and rights shares was assessable not as business profit or as profit from an adventure in the nature of trade, but as capital gains. The court emphasized that each case must be judged on its own merits, considering the totality of facts and circumstances. In this case, the assessee's purpose for acquiring the rights shares was solely to retain control over the Indian company, and the sale of shares was necessary to liquidate the overdraft. Therefore, the tribunal's decision to treat the surplus as capital gains was affirmed. |
| Summary |
In the landmark case referenced as IT REFERENCE No. 242 OF 1970, the Calcutta High Court examined the taxation of capital gains under the Income Tax Act, 1961. The case involved the Commissioner of Income Tax and Guest Keen & Nettlefold Ltd. The primary issue was whether the surplus from the sale of rights shares should be classified as business income or capital gains. The court determined that the assessee, a sterling company with a controlling interest in an Indian company, had acquired shares not for trading purposes but to maintain control over the company. The court ruled that the surplus realized from the sale was capital gains, not business profit, emphasizing that transactions must be evaluated based on their specific context and intent. This decision highlights the complexities of tax law regarding capital gains and the importance of intention in determining the nature of transactions, making it a significant reference for future cases involving similar issues. |
| Court |
Calcutta High Court
|
| Entities Involved |
Guest Keen & Nettlefold Ltd.,
Sankey Electrical Stamping Private Ltd.
|
| Judges |
S.P. Mitra, C.J.,
S.C. Deb, J.
|
| Lawyers |
B.L. Pal,
Prabir Majumdar,
Dr. D. Pal,
Pronab Pal
|
| Petitioners |
Commissioner of Income Tax
|
| Respondents |
Guest Keen & Nettlefold Ltd.
|
| Citations |
1978 SLD 889 = (1978) 115 ITR 205
|
| Other Citations |
CIT v. Sutlej Cotton Mills Supply Agency Ltd. [1975] 100 ITR 706 (SC),
Dalmia Cement Ltd. v. CIT [1976] 105 ITR 633 (SC),
Eames v. Stepnell Properties Ltd. [1966] 43 TC 678 (CA),
G. Venkataswami Naidu & Co. v. CIT [1959] 35 ITR 594 (SC)
|
| Laws Involved |
Income Tax Act, 1961
|
| Sections |
45,
28(i)
|