TMI Blog1956 (8) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... less than ₹ 75,000. He was not required to pay any premium, but required only to pay an annual rent of ₹ 3,388. On the construction of the building he was to be granted a lease by the Municipal Corporation for a period of 999 years. On 30th October, 1950, the assessee assigned his right to one Hingorani for a consideration of ₹ 32,011. The assessee had engaged a broker for the purpose of disposing of his right in the plot. It was stated that the assessee paid ₹ 1,770 by way of brokerage to the broker. It was not proved that the assessee intended to build a house on the plot nor had he the means to do it. 3. Two contentions were raised before the Appellate Tribunal. The first contention was that the sum of ₹ 32,011 was not an assessable profit in the hands of the assessee. The second contention was that, if it was held that the sum was assessable, deduction should be made on account of the ground rent and taxes paid by the assessee in the years preceding the year of account relevant for the assessment year 1951-52 (the year in which the sum of ₹ 32,011 was brought to tax by the Income-tax Officer). 4. As for the first contention, the Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce whatsoever has been adduced before us to show that the assessee ever intended to build on the plot. In fact, the assessee did not even have the means to construct a building on the plot at a cost of not less than ₹ 75,000. 3. Under the scheme the assessee was not required to pay any premium for the plot. He was only required to pay the ground rent, namely, ₹ 3,388. 4. It was represented to us that the assessee had to sell his right in the plot because he had to settle an overdraft account. The assessee relied upon the letter dated 20th October, 1950. We, however, find that the assessee had received earnest money from Hingorani on 4th May, 1950. 5. The assessee had engaged a broker for the purpose of disposing of his right in the plot. It was stated before us that the assessee paid ₹ 1,770 by way of brokerage. 6. The Income-tax Officer writes that the area in which the plot is situate was undeveloped. 7. We agree with the Income-tax Authorities that in applying for the plot and getting it the assessee indulged in an adventure in the nature of trade. It is, however, urged by Mr. Dalal that if our finding is that the assessee did indulge in an adven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rged by Mr. Palkhivala before us is that the mere fact that the assessee entered into this agreement with regard to the plot and assigned his rights thereunder did not constitute the transaction a venture in the nature of trade. What is urged is that the mere intention to re-sell a property acquired does not make the transaction a business transaction; it may still be an investment; and if there is a profit made as a result of the sale the profit would be capital appreciation not liable to tax and not business profit. Now, the line that divides a transaction from being a business transaction as against a capital investment is always a very thin one and cases may fall on one side or the other side of the line. A question of law only arises when there are no materials which can justify the finding of the Tribunal. It is quite possible that one Tribunal may take one view of the matter and another may take a different view of the matter, but if the decision of the Tribunal is based on evidence, then the High Court on a reference cannot interfere, and therefore the only question that we have to consider as far as the notice of motion is concerned is whether there were materials before t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not to hold what was being bought might, as Lord Dunedin said, provide an item of evidence that the buyer intended to trade, and if the commodity purchased in the single transaction was not of a kind normally used for investment but for trading and if the commodity could not produce an annual return by retention in the hands of the purchaser, then the conclusion may easily be reached that the venture was a trading one. Applying this test here, the commodity in which the moneys have been invested by the assessee is not a commodity usually utilised for the purpose of investment. One may invest in property, one may invest in shares, but one does not usually invest in an agreement to lease which has got to fructify into a lease after the building has been constructed. The second test suggested by Lord Carmont was also not satisfied in this case. There is no annual return from the property in which the investment has been made. The assessee had to pay ground rent and no question of any return arose till the property had been built. Therefore, in our opinion, the decision relied upon by Mr. Palkhivala is not of much assistance. We agree with him that the mere fact that a person buyin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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