TMI Blog2002 (10) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... : V. S. SIRPURKAR., N. V. BALASUBRAMANIAN. JUDGMENT The assessment year with which we are concerned is 1980-81. At the instance of the assessee, the Appellate Tribunal has stated a case and referred the following questions of law for our consideration under section 256(1) of the Income-tax Act 1961, (hereinafter referred to as "the Act"): "1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the receipts from lease and sale of horses are assessable as income in the hands of the assessee? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in rejecting the assessee's contention that proceeds from sale of horses are to be considered for assessment only under the head 'Capital gains' and not under any other head of income? 3. On the facts and in the circumstances of the case whether the Tribunal was correct in holding that the horses are not personal effects of the assessee? 4. Whether, on the facts and circumstances of the case, the Tribunal was right in holding that the entire receipts from the lease of horses accrued in this year when the auction took place, even though the lease was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsel for the Revenue. The first question that arises is whether the receipts from the sale or lease of the horses are the income of the assessee. The main case of the assessee is that the amounts were received by virtue of the hobby of the assessee of owning horses and, therefore, the receipts by way of lease or sale of horses are incidental to the hobby, and, therefore, they are not taxable. We are unable to accept the submission of learned counsel for the assessee. There is no dispute that the assessee owned and maintained a number of race horses. The assessee made use of the horses in races and she offered the winnings of the stake money received in the running of the horses in the horse races. In so far as the lease of the horses is concerned, the leases were arranged by the Bangalore Turf Club and the successful bidders were also required to use the race horse in the races. The successful bidders were entitled to use a filly in horse races for a period of four years and in the case of a colt they were permitted to use it for a period of five years. The Bangalore Turf Club retained a portion of the lease income and handed over the balance to the assessee. The assessee not only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or contemplated to be continued with a profit motive, and not for sport or pleasure." Applying the test laid down by the Supreme Court, in order to constitute an activity as business activity, there are certain essential requirements which must be fulfilled. Firstly, it must be a continuous course of dealing and, secondly, it must be carried on with a profit motive. Admittedly, the assessee has been carrying on the activity in the sale, lease and maintenance of the horses in an organised manner not only in the year in question but in the prior years and also in the subsequent previous years and further the assessee has carried on the activity with a profit motive, which is clear from the way in which the activities were carried on by the assessee. It was found as a matter of fact that there was a systematic activity in maintenance of the horses, in rearing the horses and in earning income form the horses either by way of sale and purchase of horses or lease of horses and use of the horses in the races. In other words, there is a commercially organised activity carried on by the assessee with the aid of the staff and the purchasing agents and with the help of the Bangalore Turf C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... do and the activities of maintaining, sale or lease of the horses were conducted by the assessee in a systematic manner with a commercial motive in holding and maintaining the horses. We, therefore, hold that the receipts arising either from the sale or lease of the horses were rightly held to be the income of the assessee chargeable to tax. It is found on the facts of the case that the horses were used for commercial purposes to earn profit. We, therefore, hold that the Tribunal was correct in holding that the receipts from the sale of horses or by the lease of horses were her business income and not an income from the hobby. In CIT v. K.S. Venkatasubbiah Reddiar [1996] 221 ITR 18, this court has considered the case whether the activities carried on by the assessee in acquiring race horses and in maintaining and training them and employing them in different races would amount to business or not. This court taking into account of the fact that the similar activities were carried on by the assessee for earlier assessment years, held that the activity of the assessee was his business activity and the assessee was entitled to the deduction of the losses that arose from such activity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, the Tribunal was not correct in holding that the entire income should be assessed under the head "Business". We are unable to accept the submission of learned standing counsel for the Department. The Appellate Tribunal has specifically found that the profit arising from the sale or the lease of the horses should be assessed under the head "Business" and not under the head "Other sources". The Revenue has not challenged the finding of the Appellate Tribunal that the income should be assessed under the head, "Business" in a manner known to law or in the manner permitted by the law. The said finding of the Appellate Tribunal has become final and, hence, it is not open to counsel for the Revenue in the reference made at the instance of the assessee to challenge the said finding. Hence, we do not permit counsel for the Revenue to raise such a submission and we reject the same. Accordingly, we answer the questions of law referred to us as under: Question No. 1: The Tribunal was right in holding that the receipts from lease and sale of the horses are assessable in the hands of the assessee as income. Question No. 2: The Tribunal was also right in holding that the profits fr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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