TMI Blog1992 (11) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... in the property was business income and not capital gain ? (3) Whether, on the facts and 'in the circumstances of the case, the Tribunal is right in holding that the business loss and unabsorbed depreciation of past years should be set off against the income from licence fees assessable under the head 'Income from property'? (4) Whether, on the facts and in the circumstances of the case, the finding of the Tribunal that the assessee was entitled to the set off of the unabsorbed loss as well as depreciation of earlier years, is erroneous in law ?" The facts giving rise to this reference, briefly stated, are as under The assessee is a private limited company. The relevant previous years are calendar years 1967 and 1968, respectively. The head office as well as the factory of the company are situated at Bhavnagar in the State of Gujarat.The company had been doing business of manufacturing surgical cotton at Bhavnagar. As the company suffered losses in earlier years, the board of directors, by their resolution dated September 21, 1965, accepted the suggestion of the managing director to deal in lands and buildings which, according to them, the company was authorised to do under c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 1967, and Rs. 38,400 for 1968. After paying the licence fees for a year, the Goenkas in 1968, exercised the option of purchasing the shares of Nirmal Commercial by paying the consideration of Rs. 7,77,300. The surplus which the assessee-company thus derived from acquisition and sale of shares amounted to Rs. 3,47,875. The assessee claimed before the Income-tax Officer that the income derived from the licence fees should be termed as business income. It was further claimed that the surplus of Rs. 3,47,875 derived by the assessee from the transfer of shares of Nirmal Commercial to the Goenkas was also business income. The claim was made on the basis that the transaction of purchase and sale of the property was an adventure in the nature of trade. It may be mentioned here that, during the relevant two years, there was little change in the nature of the activity undertaken by the assessee while carrying on its business of manufacturing surgical cotton. During these two years, the assessee did not manufacture surgical cotton on its own account, as it used to do in the past, but did so on job work basis for and on behalf of another manufacturer by using its own machinery, labour and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal also affirmed the findings of the Appellate Assistant Commissioner. In regard to the shares in Nirmal Commercial, it held that the asset acquired by the assessee was a business asset as the entire arrangement was an adventure in the nature of trade. This conclusion was arrived at by the Tribunal in view of its finding of fact that the company was aware of the business potentialities of the rights acquired and the very fact that, within a short time of acquiring the shares of Nirmal Commercial, it entered into an arrangement with the Goenkas to sell those rights showed that the initial acquisition was with a view to earn business profit. The Tribunal also took into account the fact that, within a short period of a year or two, the company was able to earn nearly 3 1/2 lakhs of rupees from this asset. There was, however, no dispute in this case that the company did not enter into such transaction of immovable properties either before or subsequently. This fact, according to the Tribunal, was not material in deciding whether this was An adventure in the nature of trade or not. In view of this finding, the income from the licence fees as well as from sale of shares were held to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cases, no fault can be found with the finding of the Tribunal that the acquisition of property in the instant case formed the stock-in-trade of the assessee. We have carefully considered the rival submissions in regard to question No. 1. The law in regard to the scope and ambit of powers of this court under section 256 of the Act are no more res integra. The principles are too well-settled to need reiteration. It was held as far back as in 1957 by the Supreme Court in Meenakshi Mills' case [1957] 31 ITR 28 that, where the determination of the Tribunal is one of fact, it is open to review by the court only on the ground that it is not supported by any evidence or that it is perverse. Reference may be made to the decision of the Supreme Court in the case of G. Venkataswami Naidu and Co. v. CIT [1959] 35 ITR 594, where dealing with the question whether the transaction was in the nature of trade, the Supreme Court held that, even if the conclusion of the Tribunal about the character of the transaction is treated as a conclusion on a question of fact, in arriving at its final conclusion on facts prove , the Tribunal has undoubtedly and necessarily to address itself to the legal requirem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmercial commodities and transactions on purchase of land distinguishing the transactions on purchase of land from the cases dealing with commercial commodities. It was observed (at page 26 ) : " But a transaction of purchase of land cannot be assumed without more to be a venture in the nature of trade. " The court also emphasised that ( at page 26 ) ...... a profit motive in entering into a transaction is not decisive, for 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 Raja Bahadur Kamakhya Narain Singh v. CIT [1970] 77 ITR 253, the Supreme Court again reiterated that ( at page 262 Where a person in selling his investment realises an enhanced price, the excess over his purchase price is not profit assessable to tax." It was observed (at page 262): "If the transaction is in the ordinary line of the assessee's business there would hardly be any difficulty in concluding that it was a trading transaction, but where it is not, the facts must be properly assessed to discover whether it was in the nature of trade. The surplus realised on the sale of shares, for instance, would be ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not enough to give it the character of stock-in-trade or to bring the transaction within the ambit of an adventure in the nature of trade. Considering the totality of the facts and circumstances of the case, we hold that the Tribunal was not justified in its conclusion that the property acquired by the assessee was its stock-in-trade. Question No. 1 is, therefore, answered in the negative and in favour of the Revenue. In view of the answer to the first question the answer to the second question is self-evident. The profit earned from the sale of the said property was not business income in the hands of the assessee. The second question, therefore, is also answered in the negative and in favour of the Revenue. There is no dispute at the Bar that unabsorbed loss from one head of income cannot be set off against income under another head in a subsequent year. The only submission of counsel for the assessee was that in truth and substance if the property in question is held to be stock-in-trade of the assessee then the licence fee earned by the assessee, even if it was to be assessed under the head "Income from house property", it would in reality be income from business and th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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