TMI Blog1955 (4) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... ntire extent of 5.25 acres was sold to Janardhana Mills under two sale deeds dated respectively 1st September, 1947, and 10th November, 1947. The sale proceeds, ₹ 52,606, were credited to the assessee's account in their books. ₹ 43,887 which constituted the difference between the purchase price and the sale price was treated as the income from an adventure in the nature of trade and was assessed to tax in the assessment year 1948-1949. The Tribunal ultimately confirmed that assessment. On the application of the assessee under section 66(1) of the Income-tax Act, the Tribunal referred to this Court the following question : Whether there was material for the assessment of the sum of ₹ 43,887 being the difference bet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of the case submitted by the Tribunal it summed up its findings in the case, on the basis of which it came to the conclusion that ₹ 43,887 was a gain made in an adventure in the nature of business in carrying out a scheme of profit making. These findings were (1) the benami purchase of property under sale deed dated 25th October, 1941, in the name of V.G. Raja ; (2) the sites of the plots and the piece-meal purchase of contiguous plots adjoining the mills at varying rates; (3) the small income received from the purchased property ; (4) total absence of any effort on the part of the assessee to put up buildings or to cultivate the lands ; (5) absence of the minute book required to be maintained by the assessee under the deed of pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non-production of a relevant document in its possession, that is, the minutes book of the assessee company, such an inference should have been drawn only if the assessee had been directed to produce the document and had failed to comply with the direction. The learned counsel for the Commissioner could not draw our attention to anything on record which could show that there had been such a direction and a subsequent failure on the part of the assessee. We shall therefore leave out of account findings 1, 2 and 5, except to the extent of taking due note of the fact, that the lands in question were adjacent to the mill premises. The sixth of the factors taken into account by the Tribunal appears to have led to the conclusion, that neithe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not for purposes of investment is certainly a relevant factor in deciding whether it was part of a trading venture. The dictum of Lawrence, L.J., in Leeming v. Jones 15 TC 333, 354 is an oft quoted one: It seems to me that in the case of an isolated transaction of purchase and resale of property there is really no middle course open. It is either an adventure in the nature of trade or else it is a simple case of purchase and resale of property. The learned counsel for the assessee stressed that the mere fact that the purchase of the lands was with the idea of selling them at a profit even to a pre-selected buyer was not by itself enough to prove that the transaction savoured of trade. We have already pointed out that the question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. If, however, the subject of the transaction is normally used for investment-land, houses, stocks and shares-the inference is not so readily to be drawn from an admitted intention in regard to a single transaction to sell on the arrival of a suitable pre-selected time or circumstance and does not warrant the same definite conclusion as regards trading or even that the transaction is in the nature of trade. Lord Keith pointed out with reference to the facts in Reinhold's case (supra) that these facts were, at the worst for the taxpayer, equivocal. That certainly does not suppor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is by holding that while a transaction may be a single one and in that sense isolated, it must nevertheless have some width of content and must comprise some activity in the nature of operations which are ordinarily followed in respect of trade. That was the test the learned Chief Justice postulated to decide whether a given transaction was an adventure in the nature of trade. The learned Chief Justice obviously did not lay this down as an absolute and unqualified test, because he also recorded: It is well settled now that the mere fact that a person purchases a commodity with the intention of reselling it at a profit does not by itself make the transaction of purchase and sale a trade. Such intention, however, is certainly an ele ..... X X X X Extracts X X X X X X X X Extracts X X X X
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