TMI Blog1937 (2) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... erroneously attributed part of the cost of an asset other than stock-in-trade to interest account, and having also returned Interest on securities in excess of what was actually then receivable and chargeable under Sec. 8, is he entitled as a matter of law to have his current assessment reduced by the over-assessment (or by any detail entering into that over assessment) ? The facts bearing upon the first question formulated by the Commissioner are these. The assessee does business as a Produce Exchange and receives a large amount of deposits from his clients in the course of his business. These deposits he had invested in Government Securities and in the accounting period he sold these securities in profit. A question arose whether this profit was on capital account or on revenue account and it is this question that has been formulated by the Commissioner in the form indicated above. The controversy existing between 'capital' and 'revenue' has defied solution so far and it is difficult therefore, to lay down any general considerations which would conclusively determine whether a certain income falls under one head or the other. In this case, however, it is m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by him cannot be computed in calculating his total taxable income and the question whether a certain income is or is not profit or gain within the meaning of sub-section (1) of Section 10 has nothing to do with the deductions permissible under sub-section (2) thereof. Counsel for the assessee, however, urges that the converse of the principle laid down in the Bombay judgment holds good in the present case, but we do not agree with him. That judgment did not deal with the question of profits and concerned itself only with the point whether a certain deduction fell within the four corners of Section 9. It will not, therefore, be a safe guide in this matter. In Emperor s case (supra) the Punjab National Bank Limited had invested some moneys in Government securities and claimed deduction on account of some depreciation in the value of those securities. A Division Bench of this Court disallowed the claim on the ground that the investment in question represented 'fixed capital' and not 'floating capital', of the Bank. The learned Judges remarked, It cannot be deemed that the Bank purchased these securities not for the purpose of trading in them but for the purpose of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd gains' though the expansion is more a matter of words than of substance . In their Lordships' view, income in the Indian Income-tax Act connotes a periodical monetary return, coming in with some sort of regularity or expected regularity from definite sources. The source is not necessarily one which is expected to be continuously productive but it must be one whose object is the production of a definite return excluding anything in the nature of a mere windfall . Their Lordships further thought that the expression 'receipts' arising from business as used in Sec. 4(3)(vii) meant receipts arising from the carrying on of business. We are in respectful agreement with the principles laid down by their Lordships of the Privy Council, but we fail to realise how they help the assessee. As indicated above, in every case that arises it is to be determined whether a certain profit is in the shape of a windfall or it is a part of a periodical monetary return with some sort of regularity' or 'expected regularity' and if it is found that the assessee intended to make these profits regularly the judgment of their Lordships of the Privy Council will not stand in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uth West Africa Co. Ltd. and Californian Copper Syndicate Ltd. v. Harris 5 TC 159. In 6 I.T.C. 74, the assessee had purchased a plot of land with the idea of parcelling it into small plots and selling them as building sites at a profit and he sold some plots in furtherance of this intention. Later, the land remaining unsold was acquired by Government on payment of compensation. The Department assessed the profits which had thus accrued to the assessee and the assessee contested their right to do so. It was held that the transaction was an adventure in the nature of trade coming within the definition of business in Sec. 2(4) of the Income Tax Act and that the receipts from the sales were profits of business and not casual receipts exempt from assessment. In Chunilal Kalyan Das s case (supra) the assessee who was once in regular business as a cloth and grain merchant which he had given up received a sum as brokerage for the sale of certain mills and this brokerage transaction was an isolated one in the year of assessment. On a question raised by the assessee that the sum as received by him was not assessable to income tax as it fell within the meaning of Sec. 4(3)(vii) of Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... must be taken into account in computing for income-tax purposes the profits arising from the trade, adventure, or concern in the nature of trade exercised by the Company. Pollock, M.R., observed, The question that we have to determine is whether the moneys derived from those sales of land fall into income or are to be treated as capital of the company. That is the question which often gives rise to difficulties and gives rise to different opinion. We have to decide upon the substance of the case and not upon what any individual company may deem the particular item in the course of its trading...I think the Company could, if they pleased, deal with the proceeds of the sale of land either as capital or in profit and loss account according as they determined to be right......The facts are not for us; the facts are for the Commissioners who had the case before them . In Californian Copper Syndicate Ltd. s case (supra) it was held that the difference between the purchase price and the value of the shares for which the property was exchanged is a profit assessable to Income-tax. There the assessee which was a company formed for the purpose, inter alia, of acquiring and reselling min ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ature. If he fails to prove either of these alternatives, he cannot bring his case within the purview of Sec. 4(3)(vii) and he will be liable to pay income tax on the item of income so received. We have already indicated that the business of the assessee was a quasi-banking business and it received moneys from its clients for the purposes of the business. It is further clear to us that the investments that had been made had also been made as a part of the same business and the receipts arising therefrom were to all intents and purposes receipts from business. In these circumstances, even if the receipts were of a casual or non-recurring nature, they will not be covered by Section 4(3)(vii). Apart from this, it is the intention of the assessee that is to be considered in such matters and when once it is found by the Department as a matter of fact that the assessee's intention was to make profits from these investments as a part of the assessee's business, it is doubtful whether we can go behind that finding. On these grounds, our reply to question No. 1 will be in the affirmative. The second question need not detain us long. The property in question had been taken over ..... X X X X Extracts X X X X X X X X Extracts X X X X
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