TMI Blog1950 (1) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... two gold bars on the 30th of October, 1942, at ₹ 61-11 per tola and five gold bars on the 6th of November, 1942, at ₹ 61-9 per tola. Three bars, out of those purchased, were sold by the assessee on the 27th of April, 1943, at ₹ 89-8 per tola. In July, 1943, the eldest daughter of the assessee was married and he utilised two bars in getting ornaments made for the marriage. The remaining three bars the assessee sold on the 22nd of October, 1944, at ₹ 66-14 per tola. The total price of the eight bars came to ₹ 1,24,454-9, out of which three bars were sold on the 22nd of April, 1943, for ₹ 67,125 and three bars on the 20th of October, 1944, for ₹ 50,090-15-3. I have already said that two bars were utilised by him in his daughter's marriage on the 3rd of July, 1943. The Income-tax Officer was of the opinion that these gold bars were purchased with the sole object of being sold at a profit and this was a venture in the nature of trade. He has held that the assessee had sold for ₹ 67,125 one bar that he had purchased on the 29th of October, 1942, and the two bars on the 30th of October, 1942, the total purchase price of the three bars ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the adventure comes to an end. It is on the basis of the observations in this case and in the case of Commissioner of Income-tax, Burma v. A.K.A.R. Family [1941] 9 I.T.R. 347 that it is argued that as the remaining three bars were not sold till the 22nd October, 1944, that is, after the 30th of June, 1943, the end of the account year in question, the venture had not been completed as all the gold bars had not been sold and the profits arising from the sale of only three bars on the 27th of April, 1943, could not be deemed to be taxable income. In the Rangoon case the assessee, a Hindu undivided family, took over a piece of land in settlement of a debt due to it. The land was divided into plots and the plots were sold from time to time as buyers were available. The transaction resulted in a loss of ₹ 5,137-8, The Income-tax authorities claimed that in each year in which a sale of a part of the property took place the assessee ought to have made an estimate of his loss on that particular sale and ought to have claimed the loss estimated to have been incurred in the accounting year in which it took place. It was held by the Bench of the Rangoon High Court that until the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 29th October, 1942, two on 30th October, 1942, and five on 6th November, 1942. The mere fact, however, that they were purchased on contiguous dates, according to the Tribunal, did not give them the character of a single transaction. On that finding of the Tribunal, the question No. 2, referred to us for answer, does not arise. Coming to the next point, while Mr. Pathak has urged that there is no clear finding and that, even if there be a finding that the bars were purchased for purposes of making a profit, the conclusion, being based on an inference from facts, was not binding on us. It has been strenuously urged by learned counsel for the department that the Tribunal has found as a fact that the adventure was undertaken with a view to make profits and it was not open to us to review this finding of fact and the question must, therefore, be answered in favour of the department. The point has been dealt with at some length by my brother, Seth, and it is not, therefore, necessary for me to go into it in detail, but, as the question is of some importance, I would like to briefly indicate my views. Certain facts are proved by direct or circumstantial evidence and these findings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed, three were sold by the assessee on 27th April, 1943, at ₹ 89-8 per tola and the remaining bars remained in his hand at the close of the relevant previous year. Out of them two were utilised by the assessee in getting ornaments made for the marriage of his daughter in July, 1943, and the remaining three were sold by him on 22nd October, 1944, at the rate of ₹ 66-14 per tola. In the course of the assessment for the year 1944-45, the Income- tax Officer took the view that these transactions in gold made by the assessee were an adventure in the nature of a trade and, finding that the assessee had made a profit of ₹ 20,888 by the sale of the three gold bars in April, 1943, treated that amount to be assessable income of the assessee. Accordingly, he added the amount to the other income of the assessee and imposed tax upon it. It was contended on behalf of the assessee that the gold bars were not purchased with a view to make profit by selling them, but that they were purchased with two objects in view, namely, (1) to provide himself with a portable medium with which he could run away from Kanpur if it became so necessary on account of the insecurity caused by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal has found as a fact that the adventure in gold transactions was undertaken with a view to make profits and that it is not open to us to review this finding of fact and on this finding of fact the question should be answered in favour of the department. On the other hand, it has been contended by the learned counsel for the assessee that it is primary findings of facts alone that are binding upon us but that the conclusion to be drawn from the primary findings is a question of law to be considered by this Court. The learned counsel for the assessee contends that every inference of fact from proved facts raises a question of law. The learned counsel makes a distinction between two kinds of facts, namely, those which can be established from direct evidence and those that are deduced by inference from facts established by direct evidence, and contends that the determination of the facts belonging to the second class always involves a question of law. As I do not agree with the contention of the learned counsel for the department that the Tribunal has recorded any definite finding to the effect that the transactions in gold were entered into with the sole or dominant obje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s adventure was an adventure in the nature of a trade. The following facts have been considered by the Appellate Tribunal in this connection:-- (1) During the period in question, that is, in 1942-43, United Provinces was one of the few provinces least in danger from Japanese raids and no withdrawal of capital from cloth business was necessary. (2) Political disturbances in the country were more in small towns than large. (3) The period was such when large profits were being made in the cloth trade. (4) Bifurcation of business was a popular remedy practised to evade the rigours of the levy of the excess profits tax. (5) The purchase was not made for the marriage provision of the daughters because the first sale of gold appeared to be effected three months before the elder daughter's marriage and within about six months of the date of the purchase of the gold. (6) The size of the purchase was so large that it was quite out of proportion to the financial status of the applicant as determinable from his capital accounts in the business. The first two findings, that the United Provinces was least in danger from Japanese raids, and that the political disturban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the bifurcation of business provided a remedy for the evasion of excess profits tax also does not lead to any necessary inference in favour of the department. It is based upon the assumption that the purchase was made not with the object alleged by the assessee but with the object attributed to him by the department. The inference drawn from it, therefore, suffers from the fallacy that the argument assumes that which it aims at proving. For the foregoing reasons I am of the opinion that the aforesaid six findings, taken into consideration by the Appellate Tribunal, do not necessarily lead to the conclusion that the purchase of gold was made with the sole or dominant motive of making profit, and that these findings are as much, if not more, consistent with the case of the assessee as they are with the case of the department and that upon these findings it is not possible to hold affirmatively that the dealings in gold were by way of adventure in the nature of a trade. I am, therefore, of the opinion that there was not sufficient legal evidence on the record upon which it could be held that the profits from the sale of gold bars arose from an adventure in the nature of a trade. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of the question is whether there is profit in the business of purchasing and selling this land and if so ₹ 47,533 is the amount as mentioned by the Assistant Commissioner. We are not prepared to answer it. The reason is, that proceeding on the footing that this is an adventure in the nature of trade, the profits can be ascertained normally when the adventure comes to an end . In the other case also relied upon by the learned counsel for the assessee, Commissioner of Income-tax, Burma v. A.K.A.R. Family [1941] 9 I.T.R. 347, a piece of land was taken by the assessee, in settlement of a debt due to it, and was divided into various plots which were sold from time to time to different buyers, and these transactions resulted in a loss of ₹ 5,137-8. The Income-tax authorities claimed that in each year in which a sale of a part of the property took place the assessee ought to have made an estimate of his loss on that particular sale and ought to have claimed the loss estimated to have been incurred in the accounting year in which it took place. It was observed that, when only a part of the property has been sold, whilst the rest remains in the hands of the assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing stock being cost or market whichever is lower, there would be no profit if the closing stock were valued at cost price. My answer to the second question, therefore, is: If the profits arising from the sale of gold bars made on 27th April, 1943, were profits which had arisen from an adventure in the nature of a trade, they could be taxed before the entire profits from the sale of all the gold bars became determinable. I would, therefore, answer the two questions as follows:- Answer to the first question:- In the circumstances of the case, the profits from the sale of the three gold bars sold on 27th April, 1943, have not been proved to have arisen from an adventure in the nature of a trade within the meaning of Section 2(4) of the Indian Income-tax Act and they are, therefore, not liable to income-tax. Answer to the second question:- If the profits arising from the sale of gold bars made on 27th April, 1943, were profits which had arisen from an adventure in the nature of a trade, they could be taxed before the entire profits from the sale of all the gold bars became determinable. I am further of opinion that the assessee should get his cost ..... X X X X Extracts X X X X X X X X Extracts X X X X
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