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TMI Blog1976 (9) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... nd it placed an order for the supply of four complete units of cement manufacturing machinery with M/s. F. L. Smidth and Co., Copenhagen, on February 7, 1946, to increase the production in the following factories : 1. Shantinagar, 2. Dandot, 3. Dalmianagar, 4. Dalmiapuram. Since the factory in Dandot fell within the territory of Pakistan on its constitution with effect from August 15, 1947, the appellant transferred the machinery which was meant for the Dandot factory (hereinafter referred as the Dandot machinery) to a new company known as Orissa Cement Ltd. some time in 1950-51, and charged only the invoice price which it had paid to M/s. F. L. Smidth and Co. The appellant thereafter asked for a higher price and after some negotiations the Orissa Cement Ltd. agreed on December 4, 1951, to pay a further sum of Rs. 7 lakhs, in lieu of which 70,000 fully paid up ordinary shares of Rs.10 each were given to the appellant in that company. The Income-tax Officer treated that amount as income earned by the appellant pursuant to an adventure in the nature of trade in 1952-53 assessment year, and taxed it as such. On appeal, the Appellate Assistant Commissioner also held in his or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... j Kumar Mazumdar v. Commissioner of Income-tax and Janki Ram Bahadur Ram v. Commissioner of Income-tax. Even so, no general principle can, for obvious reasons, be laid down to cover all cases of this kind because of their varied nature, so that each case has to be decided on the basis of its own facts and circumstances. It is, however, well-settled that even a single and isolated transaction can be held to be capable of failing within the definition if it bears clear indicia of trade (vide Narain Swadeshi Weaving Mills v. Commissioner of Excess Profits Tax , G. Venkataswami Naidu Co. v. Commissioner of Income-tax and Saroj Kumar Mazumdar v. Commissioner of Income-tax). It is equally well-settled that the fact that the transaction is not in the way of business of the assessee does not in any way alter the character of the transaction (vide G. Venkataswami Naidu Co. v. Cammissioner of Income-tax and Saroj Kumar Mazumdar v. Commissioner of Income-tax). It would not, therefore, help the appellant's case merely to urge either of these points for the answer to the question will depend on a consideration of all the facts and circumstances. The question under consideration is essentially ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quipments in the specifications of the plants for extension Nos. 3 and 4, which were peculiar to the layout and design for the extension at Dandot and Shantinagar and they will not now fit in exactly in the same manner in our proposed new factories. As such, it is essential that the whole specifications are carefully scrutinised and manufacture of the items which are peculiar to the lay out of Dandot and Shantinagar Works only should be kept in abeyance in order to suit the local conditions." The plants were expected to arrive from March, 1949, onwards, but this would not have been possible without an import licence. The appellant obtained the licence from the Government of India and intimated to M/s. F.L. Smidth and Co. in its letter dated August 2, 1948, that it had been permitted to import in the Indian Dominion the two plants meant for Dandot and Shantinagar. The suppliers were accordingly requested to intimate the dates up to which extension was required for the import of the machinery. A formal agreement was made between the appellant and the Orissa Government on December 23, 1948. The Dandot manchinery arrived in due course. It was delivered by the appellant to Orissa Ceme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government of India, to import the Dandot machinery in India. The appellant also informed the suppliers on September 9, 1948, that it should divert the Dandot machinery to Orissa and supply the same according to the revised specifications to suit the local conditions. (iv) A formal agreement was executed by the appellant and the Orissa Government on December 23, 1948, for the setting up of a cement factory in Orissa. (v) The Dandot machinery arrived and was supplied by the appellant to the Orissa factory against cost price, which was debited to the Orissa Cement Company. It would thus appear that, long before the Dandot machinery was due, the appellant knew that it could not be used in Dandot. It has been found that after the partition of the country the appellant could have cancelled the order for the import of the machinery but it did not do so and decided to import it with a view to supplying it to Orissa on suitable terms. It, therefore, resold it to the Orissa factory in accordance with the terms and conditions of its negotiations with the State Government. The intention of resale was, therefore, there almost from the beginning, and was really the dominant intention in i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which it was able to secure 70,000 fully paid up shares of Rs. 10. The appellant succeeded in doing so merely because it was able to substantiate its claim for a higher price or profit, on the sole ground that it was entitled to it because of the increase in the price at the time of the sale. There is, therefore, nothing wrong in the view which has prevailed with the High Court that it was an adventure in the nature of trade. It has been argued by Mr. V. S. Desai for the appellant that as it was a single and isolated transaction of purchase and sale, the onus of proving that it was a transaction in the nature of trade lay on the department. This is a correct proposition of law and, as would appear from what has been stated above, we have examined the controversy on the assumption that the burden of proving that the transaction was an adventure in the nature of trade lay on the department. The ancillary argument of Mr. V. S. Desai that a question like the present has to be examined with reference to the indicia or characteristics of the trade, is also quite correct, but counsel has not been able to contend, in the face of the facts and circumstances mentioned above, which indicia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e erection of the mill because it had subscribed to shares worth Rs. 2 lakhs. The mill was not erected and the assessee sold the shares. There was, therefore, justification for holding that the purchase of the shares was an investment to acquire the managing agency and was not an adventure in the nature of trade. In Saroj Kumar Mazumdar's case there was a single transaction of sale of rights for the purchase of land measuring 3/4 acre. by the assessee who was an engineer by profession. His construction activities declined and that was why he sold his rights in the land for Rs. 74,000 odd in excess of the amount paid by him. The income-tax department, however, failed to prove that the assessee's dominant intention was to embark on a venture in the nature of trade as distinguished from capital investment. That was also, therefore, a different case. In the case of Janki Ram Bahadur Ram the assessee was a dealer in iron scrap and hardware. He agreed to purchase all rights of a company in a jute pressing factory, but sold it at a profit. It was held that as the property purchased by the assessee was not such that an inference that a venture in the nature of trade must have been intended ..... X X X X Extracts X X X X X X X X Extracts X X X X
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