HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE
Rajputana Textiles (Agencies) Ltd. v. Commissioner of Income-tax, Bombay City
Civil Appeal No. 282 of 1955
[1962] 1 SCR 917 ·
Taxation on Income (Investigation Commission) Act, 1947: section 8(5) · Indian Income-tax Act, 1922: sections 4(3)(vii) and 66(2) · Constitution of India: Article 14 (new challenge not entertained)
Sources & disclosures includedDownload original judgment / order
5-judge bench; unanimous judgment delivered by J. L. Kapur, J. · S. K. Das, J. · J. L. Kapur, J. · M. Hidayatullah, J. · J. C. Shah, J. · T. L. Venkatarama Aiyar, J.
Assessment years: 1945-46
01 · Facts of the case
The company, capitalised at Rs.20 lakh, acquired the Apollo Mills managing agency and 19,76,000 shares from Sassoons under linked agreements. Before purchase, its promoters arranged resale of much of the holding to finance completion. Sale of 13,74,000 shares produced a Rs.16,52,600 surplus; about six lakh shares were retained to support the agency. The Investigation Commission treated the resale as trade for assessment year 1945-46, and the High Court upheld that conclusion (SCR pp.919-923; PDF pp.3-7).
Source: Primary judgment: facts
02 · Discussion by the Hon’ble Court
The Court assessed the total circumstances and intention at acquisition, treating the legal character of the transaction as a mixed question of law and fact. Prearranged resale, limited holding capacity and separately priced agency and shares distinguished investment cases. Acquiring an enduring agency did not turn the shares deliberately acquired for resale into an investment. The company objects were relevant but not decisive. The Court answered even the original, wider referred question against the assessee; no ruling approving the High Court's narrowing was needed (SCR pp.923-928; PDF pp.7-12).
Source: Primary judgment: discussion
03 · Judicial decision
The appeal was dismissed with costs. The surplus on the shares sold was profit from an adventure in the nature of trade. Other proposed questions were covered or did not arise, and the late notice of motion lacked a condonation application. A new Article 14 challenge could not be introduced within this advisory-reference appeal (SCR pp.921, 928-929; PDF pp.5,12-13).
Source: Primary judgment: decision
04 · Outcome / in whose favour
In favour of Revenue: the Rs.16,52,600 surplus remained taxable trading profit. The Court did not declare the Article 14 challenge meritless; it declined to entertain it in these proceedings (SCR pp.928-929; PDF pp.12-13).
Source: Primary judgment: outcome
05 · AKHB REVIEW POINT
AKHB analysis: distinguish shares intended for retention from shares committed to resale at acquisition, even within a single financing arrangement. Contemporaneous broker arrangements, available capital and separately agreed prices can reveal the character of the particular block sold. Preserve reference issues and limitation compliance before appeal.
Source: Primary judgment: review point
Source & verification
Download original judgment / order · Open cited source rendition
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Statutory scope
Historical 1922 Act and Investigation Commission reference; present capital-gains, securities and appellate provisions require separate review.
Later treatment
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