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TMI Blog1971 (8) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... . 9,250. On April 8, 1961, the first plot was sold by it for Rs. 27,000 and on June 9, 1961, it sold the second plot also for Rs. 27,000 thereby earning a substantial profit. During the assessment for the year 1962-63 the assessee contended before the Income-tax Officer that this profit was a capital gain. The Income-tax Officer repelled this contention and held that this profit amounting to Rs. 35,319 was business profit earned by "adventure in the nature of a trade". The amount was, therefore, added to the income of the assessee and assessment was framed accordingly. Aggrieved by this, the assessee filed an appeal before the Appellate Assistant Commissioner but the same was dismissed. In second appeal before the Tribunal, however, the contention of the assessee was accepted and the Tribunal held that the plots had been purchased in the course of investment and the profits realised on their sale was not an income from business. At the instance of the Commissioner, the Tribunal has now referred the following question for decision of the court: "Whether, on the facts and in the circumstances of the case, the excess price realized by the assessee on the sale of the two plots in Defe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal. It is not the case of the revenue that there was no evidence in this case before the Tribunal in support of the findings recorded by them. The question, therefore, has to be answered on the basis of facts as found by the Tribunal. Section 28(1) of the Act provides that profits and gains of any business or profession which was carried on by the assessee at any time during the previous year shall be chargeable to income-tax. "Business" is defined in section 2(13) of the Act to include any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture. The case of the revenue is that the sale of these two plots by the assessee was an adventure in the nature of trade or business. No hard and fast test had been laid down for the determination of this question. The decision essentially has to depend on the facts of each case. As observed by Shah J. (as he then was) in Janki Ram Bahadar Ram v. Commissioner of Income-tax on page 25, the question whether the transaction is an adventure in the nature of trade must depend upon the collective effect of all the relevant material brought on the record. General criteria indicating that certain fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -requisitioned, and selling it after the land was released: Saroj Kumar Majamdar v. Commissioner of Income-tax, and a syndicate formed to acquire an option over a rubber estate with a view to earn profit, and finding the estate acquired too small acquiring another estate and selling the two estates at a profit: Leeming v. Jones may not be regarded as commencing a venture in the nature of trade. These are cases in which the commodity purchased and sold is not ordinarily commercial, and the manner of dealing with the commodity does not stamp the transaction as trading venture." The profit motive, it was observed by the learned judge, in entering into a transaction is not decisive because in the normal course an accretion to capital does not become taxable income merely because an asset was acquired in the expectation that it may be sold at profit. In Saroj Kumar Majumdar v. Commissioner of Income-tax noticed in Janki Ram Bahadur Ram's case by the learned judge, the appellant was engaged in various types of business activities and was a shareholder and a director and managing director of several companies and was also a partner in a firm of engineering works. With a view to acquire a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that the appellant, at the time when he entered into the agreement with the society, was doing good business otherwise was also taken to be a relevant consideration. It was, in the result, held that, in the circumstances of the case, it was not unnatural for the appellant to look forward to continue his business in as prosperous a way as he had been doing in the recent past and to raise sufficient funds to build his own residential house or to construct a workshop for his own engineering business. The probability that the site might also appreciate in value was held not necessarily to lend itself to the inference that the transaction was a venture in the nature of trade as distinguished from capital investment. Then further in G. Venkataswami Naidu & Co. v. Commissioner of tax, Gajendragadkar J. (as be then was), speaking for the court with reference to the Indian Income-tax Act, 1922, said: " The expression 'adventure in the nature of trade' is used by the Act in section 2, sub-section (4), which defines business as including any trade, commerce or manufacture, or any adventure or concern in the nature of trade, commerce or manufacture. Under section 10, tax shall be, payable b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not by way of adventure in the nature of trade. Shri G. C. Sharma, appearing for the revenue urged that, in the background that land prices in Delhi were continually rising, the fact that the assessee-family acquired as many as three plots within a short span of nearly 1 1/2 months showed that its intention was to acquire them by way of commodity for sale and this fact is borne out by its subsequent conduct in selling the two plots. This inference would not be legitimate in the facts of the Tribunal's findings of fact that the assessee-family wanted to acquire status and stability by making permanent investments in immovable properties and by building a permanent source of property income. Further, even if it be assumed that the plots were purchased as they were considered to be profitable as their price was likely to appreciate, this alone, in law, will not make the transaction an adventure in the nature of trade. Profit-making would normally not be an irrelevant consideration for every honest and prudent purchaser but will not in every case make the purchase a venture in the nature of trade. To bring a transaction within this category it has to be shown that the sole intention a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n those cases were wholly different and do not help the revenue. In Dalmia Cement's case, the question related to the transaction of sale of machinery. The assessee supplied these machineries to Orissa Cement Limited floated by it and the Orissa Government. The cost of the machinery was debited in the books of the assessee to Orissa Cement Limited and credited to the suppliers at the invoice price. At some later stage, the assessee asked for revaluation of the price owing to rise in price after the machinery had been ordered. The matter was referred to an expert who was of the opinion that the Orissa Cement Limited benefited to the extent of about Rs. 21 lakhs. The Orissa Government had no objection to the Orissa Cement Limited paying the assessee some extra amount. Orissa Cement Limited accordingly passed a resolution sanctioning payment of a sum of Rs. 7 lakhs and in lieu of cash payment allotted fully paid up shares of that value to the assessee. In these circumstances, it was held that when the order was given to the supplier to despatch the plant it was with the intention of selling it to Orissa Cement Limited and the profit earned was a venture in the nature of trade. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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