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PETITIONER: I. C. I. (INDIA) PRIVATE LTD.

       Vs.

RESPONDENT: C. I. T., WEST BENGAL

DATE OF JUDGMENT20/01/1972

BENCH: GROVER, A.N. BENCH: GROVER, A.N. BEG, M. HAMEEDULLAH

CITATION:  1972 AIR 1524            1972 SCR  (3) 138  1972 SCC  (3) 370  CITATOR INFO :  RF         1986 SC1428  (16)

ACT: Income-tax  Act,  (1961) ss. 52 and 256-Directions  by  High Court  to Tribunal to refer questions-Scope of High  Court’s jurisdiction

HEADNOTE: After negotiations in 1953 with the concerned Department  of the  Government  of India and the Reserve Bank,  a  Company, incorporated in U.K. advanced large sums by way of loans  to its   subsidiary   in  India,  namely  the   assessee,   for subscribing  for  shares  in  some  Indian  Companies.   The correspondence showed that the U.K. Company had the right to acquire  at any time the shares at par, in  satisfaction  of the  loans.   In 1961, the assessee transferred  the  shares when called upon by the U.K. Company to do so.  The  Income- tax  Officer applied s. 52 of the Income-tax Act, 1961,  and assessed the assessee to capital gains tax, which was not in existence  in 1953 but was Reintroduced in the Finance  Bill of 1959.  The Income-tax Officer held that the object of the transfer was to avoid or reduce the assessee’s liability  to capital  gains  tax.  The Appellate  Assistant  Commissioner however,  held that the assessee was not liable  to  capital gains  tax, and the Appellate Tribunal, after  an  elaborate discussion  of  the  correspondence,  confirmed  the  order, holding that the transfer was not effected with that object. The  Department  applied  to  the  Tribunal  to  refer   the questions,  (i) whether certain documents were not  properly construed,  (ii)  whether the Tribunal ignored  evidence  on essential matters, (iii) whether the finding of the Tribunal was perverse, and (iv) whether s. 52 was not applicable,  as arising out the Tribunal’s order.  The Tribunal rejected the application. The Department then moved the High Court and the High  Court directed  the  Tribunal to state a case in relation  to  the four questions, but the High Court did not give any  reasons for doing so. Allowing the appeal to this Court, HELD  : The High Court can exercise its jurisdiction in  the matter of reference, (a) when the point for determination is a  pure  question  of law, such as, the  construction  of  a

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statute  or  a  document of title; (b) when  the  point  for determination is a mixed question of law and fact-(While the findings  of  the  Tribunal  on the  facts  are  final,  its decision  as  to  the  legal effect of  the  findings  is  a question  of  law.  Where, however, the finding  is  one  of fact,  the  fact that it is an inference  from  other  basic facts will not alter its character as one of fact); and  (c) when a finding on a question of fact is perverse. [147C-E] The necessary ingredients of s. 52 are : (i) there should be a  direct  or  indirect connection between  the  person  who acquires  a capital asset and the assesee; (ii) the  income- tax officer should have reason to believe that the  transfer was  effected with the object of avoidance or  reduction  of the liability of the assessee to capital gains; and (iii) if the first two conditions                             139 are  satisfied then the full value of consideration for  the transfer  may  be taken to be the fair market value  of  the capital  asset on the date of the transfer.   The  intention with  which  a particular transfer is made  and  the  object which  is  to be achieved by such transfer  are  essentially questions of fact, the conclusion relating to which, are  to be arrived at on a consideration of relevant material;  that is,  before  the income-tax officer can have any  reason  to believe  that  a  transfer  was  effected  with  the  object mentioned in the section facts, must exist showing that  the object  was  to  avoid or reduce the  liability  to  capital gains. [141 H; 142 A-D] In  the present ease, the orders of the Tribunal show  that there  was  no  dispute  as  to  the  construction  of   any expression  in  any  letter or document,  that  no  relevant evidence  was overlooked, that the inference was drawn  from other  facts  and,  that  no  question  was  raised  on  the construction  of s. 52. When the Tribunal found, as a  fact, that  before there was any proposal to reimpose the  capital gains  tax which had remained abolished for some  time,  the scheme  between the assessee and the U.K. Company  bad  been fully  evolved,  the  applicability of s. 52  could  not  be attracted.   The  findings of the Tribunal that  the  object mentioned in the section could not be held to be established from  the  mere absence of a formal  agreement  between  the assessee  and  the  U.K. Company, is not  perverse,  but  is supported  by evidence and is eminently reasonable. in  view of the clear, cogent and precise findings and conclusions of the Tribunal, the High Court, should at least have  recorded a  speaking  order showing how the questions of law  of  the nature  sought  to be referred arose from the order  of  the Tribunal. [146 B-D; 141 A-C, F; 148 C.D] Shree Meenakshi Mills Ltd. v. C.I.T., Madras, 31 I.T.R.  28, followed.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1308 of 1970. Appeal  by special leave from the order dated  September  8. 1970 of the Calcutta High Court in Income Tax Reference  No. 50 of 1971.  N. A. Palkhivala, Veda Vyasa, T. A. Ramachandran and D.   N. Gupta, for the appellant. Y.  S.  Desai,  S.  K. A iyar and  H.  D.  Sharma,  for  the respondent. The Judgment of the Court was delivered by Grover, J. This is an appeal by special leave from an  order of   the  Calcutta  High  Court  directing  the   Income-tax

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Appellate   Tribunal,  ’B’  Branch,  Calcutta,  to  draw   a statement  of case relating to four questions of law  which, it was stated, arose out of the order of the-Tribunal in the matter of assessment of the appellant which was the assessee in  respect of the assessment year 1962-63.   The  Appellate Tribunal had rejected the application of the Commissioner of Income-tax requiring it to refer those questions to the High Court.   The High Court, on being moved, issued a rule  nisi and  then  made  it absolute after  full  arguments  without giving any reasons, whatsoever. 140 The  assessee is a 100% subsidiary of Imperial Chemical  In- dustries   Ltd.,   incorporated  in   the   United   Kingdom (hereinafter referred to as I.C.I. for convenience).  I.C.I. advanced large amounts by way of loans to the assessee  from time   to  time.   This,  it  was  claimed,  was  done   for subscribing  to  shares  in three  Indian  Companies  called Indian  Explosives Ltd., Alkalai & Chemical  Corporation  of India and Atic Industries Private Ltd., (hereinafter  called as I.E.L., A.C.C.I and ATIC respectively).  Subsequently the assessee  transferred the shares in the aforesaid  companies at  par to I.C.I. in satisfaction of the loans  advanced  by that  company.  The Income-tax Officer applied S. 52 of  the Income-tax  Act,  1961 (hereinafter called  the  ’Act’)  and assessed  the  assessee  to capital  gains.   The  Appellate Assistant Commissioner took the contrary view and held  that on  the facts which had been established, the  assessee  was not  liable  to capital gains under the  aforesaid  section. The Tribunal upheld the decision of the Appellate  Assistant Commissioner by a detailed and well reasoned order. Broadly, the case of the assessee was that I.C.I. wanted  to make  investments  in  India  in  sterling  currency.    The assessee  was  already  in existence  but  the  other  three companies  which  have  been  mentioned,  were  incorporated later.   I.C.I. devised a scheme by which it could make  the investment as desired by it and by which it could also  take advantage of the tax relief which could be availed of by the new enterprises under s. 15(C) and 56.(A) of the  Income-tax Act,  1922.   The  scheme in short  was  that  I.C.I.  would arrange  to let the assessee hold shares in the  three  com- panies  by  investing  the money which was to  be  given  by I.C.I. to the assessee.  The modus operandi was that  I.C.T. would  give that money by way of loans to the  assessee  who agreed  that  the  shares in the three  companies  would  be transferred to I.C.I. in satisfaction of the loans at par or issue price as and when desired by I.C.I. All this was  done after  negotiations  with the concerned  Department  of  the Government  of  India  at the highest  level  and  with  the approval  of the Reserve Bank of India.  The  entire  scheme was  conceived  and  was put into operation  prior  to  30th November   1956  when  the  Finance  Bill   was   introduced reimposing  capital gains tax which had  remained  abolished for  certain  years.   There was a  provision  for  charging interest  by  the  I.C.I. from the assessee at  a  rate  not exceeding 1/2% above the Indian Bank rate which came to  51% per annum but the interest was not to exceed in any case the dividends  received by the assessee from those  shares.   It was claimed on behalf of the assessee that this  arrangement was  advantageous both to I.C.I. and the  assessee,  I.C.I. having  taken  the  risk  (of  depreciation  in  shares   or otherwise)   attached   to  the  new   business   pioneering adventures, ensured that capital appreciation of the shares, if ’any, also went                             141 to  itself.   The assessee did not suffer  any  disadvantage

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because  it  had  to  pay no interest  if  no  dividend  was received  and  it  could keep and get  the  benefit  of  any dividend  in  excess  of  5 1/2%.  As  a  result  of  I.C.I. investments  being  held  through the  assessee  instead  of directly, I.C.I. achieved an advantage of saving tax in U.K. amounting to pound 68,000 in the relevant years. In  1959  the  structure of Indian  taxation  regarding  the grossing  up of dividends was radically changed and  by  the Finance  Act  1959, the system of grossing up  of  dividends (under  s.  16(2) and 18(5) of 1922 Act) was  abolished  and intercorporate dividends became liable to income tax at each stage.  Thus, the dividends passing from the three companies through the assessee to I.C.I. became liable to tax  stages. This affected the net return of I.C.I. on its investments in the three companies substantially.  In these  circumstances, it  was decided by I.C.I. that the investments in the  three companies  should ’he held by it directly.  For that  reason it called upon the assessee in February 1961 to transfer  to it the aforesaid shares in the three companies at the  issue price  in satisfaction of the sterling loans  in  accordance with  the previous agreements.  The approval of the  Reserve Bank  to these transfers was received in February  1961  and the  transfers were made in March/April 1961.  According  to the assessee there was no question of the transfer of shares having  been  affected  with  the  object  of  avoidance  or reduction of the liability of the assessee to capital  gains which alone could attract the applicability of s. 52 of  the Act. Section 52 is in the following terms               "Consideration for transfer in cases of under-               statement:  Where  the person who  acquires  a               capital asset from an assessee is directly  or               indirectly connected with the assessee and the               Income-tax Officer has reason to believe  that               the  transfer was effected with the object  of               avoidance or reduction of the liability of the               assessee  under s. 45, the full value  of  the               consideration for the transfer shall, with the               previous  approval  of the  Inspecting  Asstt.               Commissioner,  be taken to be the fair  market               value of the capital asset on the date of  the               transfer".               The necessary ingredients of the section are (i)there  should be a direct or indirect connection  between the  person who acquires a capital asset and  the  assessee; (ii)  the Income tax Officer should have reason  to  believe that the transfer was effected with the object of  avoidance or  reduction  of the liability of the assessee  to  capital gains; (iii) if the first two conditions are satisfied  then the full value of consideration for the 142 transfer  can  be taken to be the fair market value  of  the capital asset on the date of the transfer. As regards the first requirement, that was admittedly satis- fied  in the present case.  The second requirement could  be satisfied only if there was any cogent material on which the Income  tax  Officer could have reason to believe  that  the transfers  were  effected with the object of  avoidance  and reduction  of liability to capital gains.  It is  abundantly clear that the intention with which a particular transfer is made and the object which is to be achieved by such transfer is essentially a question of fact the conclusion relating to which is to be arrived at on a consideration of the relevant material.  In other words, before the Income tax Officer can have any reason to believe that a transfer was effected with

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the object mentioned in the section facts must exist showing that  the  object was to avoid or reduce  the  liability  to capital gains. The Tribunal examined fully the correspondence and the other material  with regard to each of the three Indian  companies in which the investment had been made of the money  advanced by  I.C.I.  to  the assessee.  We  may  briefly  notice  the discussion  relating  to each company.  It was in  or  about 1949  that  I.C.I. was asked by the Government of  India  to consider   the  manufacture  of  commercial   Lasting   High Explosives  in  India.  Negotiations advanced  more  towards October  1953  when the representatives of  I.C.I.  met  the officials of the Government of India.  The Tribunal referred to  the  minutes of the meeting held on October 1,  1953  as also  on  the 6th October 1953.  In the final draft  of  the Declaration  of  Intention dated November 5.  1953,  it  was mentioned that the Government had agreed that if T.C.I. made a  loan to the assessee the latter would hold the shares  in I.E.L. and that the loan "may be repaid by a transfer of the shares  to I.C.I. at any time".  On 21st December 1954,  the assessee  applied  to the Reserve Bank of India  for  formal sanction  for  borrowing Rs. 160 lakhs from I.C.I.  for  the purchase of shares in I.E.L. in terms of the agreement dated November  5, 1953.  It was stated in the letter that  I.C.I. would charge no interest until such time as the shares began to  yield  dividends.   The loans were  advanced  from  30th September  1954  to  30th June 1957 by  the  I.C.I.  to  the assessee  of  the equivalent of Rs. 160 lakhs  in  Sterling. The  other correspondence relating to the  aforesaid  amount was  also  noticed  by the Tribunal.  In 1958  there  was  a Rights  Issue by I.E.L. I.C.I. agreed to give a loan of  Rs. 80  lakhs to the assessee to cover the Sterling  requirement of I.E.L. The assessee was to take up shares of that amount. The  terms  of the loan were that I.C.I. had  the  right  to acquire  at  any  time the shares held by  the  assessee  in I.E.L. 143 at par in satisfaction of the loan and the rate of  interest payable on the loan was to be I% above the Indian Bank rate. This  was followed by other correspondence and a  resolution which  was  recorded on 30-9-1958 containing  terms  of  the second  loan  of Rs. 80,00,000/-.  It is  not  necessary  to refer  to  the  other  correspondence  looked  into  by  the Tribunal  with  regard  to  that  loan.   On  15-2-1961  the assessee   was  called  upon  by  I.C.I.  to  transfer   the investments  in  satisfaction  of  the  loans.   After   the sanction  was obtained from the Reserve Bank of  India,  the shares  were transferred at par.  The Tribunal  referred  to the undisputed facts relating to the circumstances in  which the  scheme  for  advancing the loan  to  the  assessee  for investment  in I.E.L. came to be mooted and  was  ultimately approved by the Government.  This is what the Tribunal  said :               "The above background would show that the idea               was   not  to  make  the  assessee  the   real               beneficial owner of the shares.  The fact that               the  shares  should be held only  for  a  time               beneficially by the assessee is clear from the               "Declaration of Intention" dated 5-11-1953". Before  the  Tribunal  the counsel for  the  Department  had accepted  the position that if there was an  arrangement  or agreement before the reintroduction of capital gains tax  he would  have no case.  According to him, until the  transfers were actually made of the shares, there was no agreement  on which the  parties could have gone to court  in  order  to

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obtain  the share transfers at par in favour of  I.C.I.  The Tribunal  proceeded first to examine whether there  was  any kind  of  understanding  between  the  assessee  and  I.C.I. regarding   the   transfer   of  shares   at   par.    After recapitulating  the correspondence and the  relevant  facts, the Tribunal came to the following conclusion:               "Taking  this  along with the minutes  of  the               meeting  with the officials of the  Government               of  India, in October 1953, it is  clear  that               the  whole  idea of I.C.I. throughout  was  to               make  some funds available to the assessee  so               that the shares could be acquired in its  name               and  that the shares could be  transferred  to               I.C.I. as and when it demanded". It  was,  however, stated by the Tribunal that  taking  into account  the  correspondence and the documents  referred  to earlier  it was satisfied with the assessee’s case that  the transfer  of shares to London at issue price or at  par  was throughout  the  basis  of  the advances  of  loans  to  the assessee.  It is necessary to reproduce paragraph 31 of  the order of the Tribunal :-               "In October 1953, there was no mention of  any               capital gains tax being revived.  At that time               the asses-               144               see could not have had any idea of avoiding or               reducing  any liability to capital gains  tax.               The  learned counsel for the  department  laid               some  emphasis on the fact that there  was  no               enforceable  arrangement.  The question as  to               whether  there was an enforceable  arrangement               or  not is not really material.  What we  have               to  find out is whether the object in  putting               through these transactions of taking over  the               shares  at  par or at issue price was  one  of               avoidance or reduction of liability to capital               gains   tax.    That  object  does   not   get               established   by  the  mere  absence   of   an               enforceable arrangement.  Having regard to the               assessee being the subsidiary of I.C.I., there               is  nothing surprising about  the  arrangement               not  being so formal or not being put  through               after  complying with all the necessary  legal               formalities.  The absence of formal  agreement               is  thus  understandable in this  context  and               cannot by itself suggest anything in favour of               the  department.  Businessmen are  not  always               motivated by legalistic considerations.   Even               taking  that the arrangement was only  binding               morally and not legally, still so long as  the               assessee  wanted to fulfil a moral  obligation               and had not the capital gains tax in mind,  it               cannot  be  said  that  the  transaction   was               entered  into with the object of avoidance  or               reduction of liability to capital gains tax".               The Tribunal proceeded to say               "We  have  to  find out  the  object  of  the,               transaction.   It is removed in point of  time               from  the result.  In such a case  one  cannot               try to infer the object from the results.   We               really  have  to put ourselves at a  point  of               time     when     the     transaction      was               conceived....Taking  the materials before  us,               we  consider that there is nothing to  suggest               that the parties had the capital gains tax  in

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             their  mind  in 1953 and later when  they  put               through the aforesaid transactions.  We  have,               therefore,   to   hold   that   the    factual               requisites   of  section  52  have  not   been               established here". In  dealing with the second Company, namely, A.C.C.I it  was pointed out by the Tribunal that the scheme for  manufactur- ing Polythene was placed before the Government of India by a letter of the assessee dated 13-12-1955 addressed to Mr.  H. V. R. lengar, Secretary, Minister of Commerce & Industry, in which it was specifically stated that to enable the assessee to  subscribe  for  the new shares  I.C.I.  would  lend  the subscription  monies  to the assessee on  the  understanding that at a later date I.C.I. could acquire at the issue price these new shares in satisfaction of its 145 loan.   The  Tribunal  dealt with  all  the  relevant  facts relating  to the loan advanced to A.C.C.I.  including  those stated  in the affidavits of P. T. Manzies  dated  17-8-1966 and  U. R. Newbery dated 10-1-1967 and considered  that  the transaction  relating  to this Company was not  in  any  way different from those relating to the I.P..L. ATIC, the third Company  was incorporated primarily for the  manufacture  of certain Dye-stuffs.  On 29-12-1955 I.C.I. agreed to  advance Rs.  25 lakhs as loan to the assessee.  The shares  acquired under the loan could be transferred to I.C.I. on request  by the  latter at the issue price.  I.C.I. waived its right  to interest on the loan until the commencement of the period in respect  of  which  ATIC paid the  dividend.   There  was  a further  loan  of Rs. 35,00,000 on the  same  terms.   These shares  were age subsequently required to be transferred  to I.C.I.   in   February  1961.    The   Appellate   Assistant Commissioner  had referred to the affidavits which had  been filed  on behalf of the assessee and had mentioned that  the Department had not cross-examined the deponents.  Before the Tribunal  the  counsel  for the Department  stated  that  he accepted  the affidavits as correct in so far as facts  were concerned  but  he only disputed the  inferences  therefrom. The Tribunal in this connection observed:-               "In  our  opinion, once  the  facts  mentioned               therein  are taken as correct,  the  inference               that  the transaction was not for *he  purpose               of avoiding  or reducing liability to  capital               gains tax has to follow". Finally  the  Tribunal,  as  stated  before,  confirmed  the decision  of the Appellate Assistant Commissioner  that  the material  on  record did not justify the conclusion  of  the Income  tax Officer that the object of the transfer  of  the shares of all the three Companies by the assessee to  I.C.I. was the avoidance of liability to capital gains which  would attract the applicability of s. 52 of the Act. The Commissioner of Income tax asked for a reference on  six questions.    The  Tribunal  again  examined   the   further contentions  of the Department in its order dated  28-7-1969 by  which  it declined to make the reference on  the  ground that  no  question  of law arose out of  the  order  of  the Appellate Tribunal, Only four questions appear to have  been pressed  for  being  referred.  As regards  question  No.  1 (which  was  No. 3 before the Tribunal) it was  pointed  out that  it proceeded on the basis that there was some  dispute about  the construction of the correspondence or  documents. The Tribunal observed that there was no such dispute and  it had  not been suggested that a particular expression in  any letter  or document had been wrongly  construed.   Regarding question  No. 2 (which was No. 4 before the  Tribunal),  the

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Departmental  representative was asked to particularise  the docu- 146 ments  or evidence omitted from consideration.  He  referred to certain documents and evidence which according to him had not  been considered by the Tribunal.  The Tribunal made  it cleat  that  all  the  relevant  materials  which  had  been referred to had been considered by it.  These materials were distributed  over four bulky volumes of typed  records  and, therefore,  each document could not have been  mentioned  in the  order.  Nothing relevant was actually over-looked.   At any  rate  the documents on which  particular  reliance  was placed  on behalf of the Department were considered and  the Tribunal   observed  that  the  grievance  of  omission   of materials from consideration related to irrelevant  matters. As  regards (the other two questions, the Tribunal  observed that  the charge of perversity was only a disparate  attempt at extracting a question of law where, none existed and that the object or intention of an assessee was always a question of fact.  It was a factual inference to be drawn from  other facts.   It was pointed out that on the construction  of  s. 52, the parties had not joined, any issue. We  may now mention the four questions which the High  Court directed to be referred :-               1.    "whether   on  the  facts  and  in   +he               circumstances  of  the case and  on  a  proper               construction  of  the  documents  referred  to               and/or considered by it the Tribunal was right               in  arriving at the finding that the  transfer               of the shares to Imperial Chemical  Industries               Ltd.,  London  at the issue price or  par  was               throughout  the basis of the advance of  loans               to the assessee ?               2.    Whether, in arriving at the said finding               the  Tribunal  misdirected itself  in  law  in               basing  the said finding on evidence  covering               some  matters only and ignoring,  evidence  on               other essential matters ?               3.    Whether,  on  the  facts  and  in   +,he               circumstances of the case and particularly  in               view   of  the  finding  that  there  was   no               enforceable  agreement  making  it  obligatory               upon  the assessee to transfer the  shares  to               Imperial Chemical Industries Ltd., London,  at               par  or  issue  price the  conclusion  of  the               Tribunal  that the transfer of the  shares  by               the assessee to the latter company at par  was               not effected with the object of avoidance  or               reduction of the liability of the assessee  to               capital gains tax was unreasonable or perverse               ?               4.   Whether,   on  the  facts  and   in   the               circumstances  of the case, the  Tribunal  was               right in holding, that               147               s.    52 of the Income tax Act, 1961, was  not               applicable to the facts of the case ? On the analysis of s. 52 of the Act made by us at a previous stage  and  the  clear,  cogent  and  precise  findings  and conclusions of the Appellate Tribunal, we are wholly  unable to comprehend, how any question of law of the nature  sought to  be  referred  arose; or arises from  the  order  of  the Appellate  Tribunal.   It is unfortunate that in a  case  of this nature and magnitude, the High Court did not choose  to record  a  speaking  order to enable us  to  appreciate  the

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reasons  which  prevailed  with it for  directing  the  four questions to be referred.  The jurisdiction in the matter of reference can be exercised (i) when the point for determina- tion  is a pure question of law such ’as construction  of  a statute  or  document  of title; (ii)  when  the  point  for determination  is a mixed question of law and  fact.   While the  finding  of  the Tribunal on the  facts  is  final  its decision  as  to  the legal effect of those  findings  is  a question  of law, (iii) a finding on a question of  fact  is open to attack as erroneous in law when there is no evidence to  support  it or if it is perverse.  Where,  however,  the finding  is  one of fact, the fact that it is  an  inference from  other basic facts will not alter its character as  one of fact (See Sree Meenakashi Mills Ltd. v., Commissioner  of Income tax, Madras(1).  In that case it was held that  there was  no question of construction of any statutory  provision or   document  of  title.   The  issues  which   arose   for determination, whether the sales entered in books of the ap- pellant in the names of the intermediaries were genuine, and if  not,  to whom the goods were sold ’and for  what  price, were  all  questions of fact.  Their determination  did  not involve  the  application of any legal principles  to  facts established  by the evidence.  The findings of the  Tribunal were   amply  supported  by  evidence  and  were   eminently reasonable.   It,  therefore,  followed that  there  was  no question which could be referred to the Court under s. 66(1) of the Income tax Act 1922.  The same principles will  apply when a reference is sought under s. 256 of the Act.  We  are altogether  unable  to  see how findings  of  the  Appellate Tribunal that the transfer of shares in the present case was not  made  with  the intention or  object  of  avoidance  or reduction  of liability to capital gains were not  questions of  fact and did not depend on inference of facts  from  the evidence  or the material before the Tribunal.  It can  well be  said that the determination of the question whether  the object of the assessee was to avoid or reduce its  liability to capital gains by making the transfers in question did not involve  the   application of any legal  principles  to  the facts  established  by the evidence.  The  findings  of  the Tribunal were amply supported by evidence and were eminently reasonable.  It (1)  31 I.T.R. 28. 148 is  true  that the amount involved is very  large  but  that cannot  Justify  a  reference as under S.  256  of  the  Act neither  the Appellate Tribunal could make a  reference  nor could  the High Court direct the reference to be made to  it by the Tribunal on pure questions ,of fact. The  learned  counsel  for the Commissioner  has  sought  to invite  our attention to certain parts of the order  of  the Tribunal  and, in particular, to the statement extracted  by us  at  an  earlier stage about  the  question  whether  the assessee  had  held the shares beneficially  and  the  point which was debated before the Tribunal whether there was  any binding legal agreement between the assessee and I.C.I.  for transfer  of  the shares at par.  We are unable to  see  how these  matters were relevant for the purpose of  determining the  intention  or object under-lying the  transfer  of  the shares to I.C.I. by the assessee.  Once the Tribunal came to the  conclusion  which was purely one of  fact  that  before there  was any proposal to reimpose capital gains tax  which came  to be embodied in the Finance Bill towards the end  of November 1956, the scheme had been fully evolved between the assessee and I.C.I. of making the loans by the latter to the former  for being invested in the three companies  and  that

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the  shares would be transferred at par by the  assessee  to I.C.I.  whenever desired, the applicability of s.  52  could not be attracted as the same depended on certain facts which must exist or must be found and which had not been so  found by the Tribunal. In  the  result the appeal is allowed and the order  of  the High  ,Court  is hereby set aside.  The  assessee  shall  be entitled to its costs in this Court. V.P.S.                                      Appeal allowed. 149