TMI Blog1991 (4) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... bout 1968, Salar Jung Sugar Mills Ltd. acquired 47% shares in a company named Tungabhadra Pulp and Board Mills Ltd. A partnership firm, Messrs. Straw Board Dealers, which was the sole selling agent of Tungabhadra Pulp and Board Mills Ltd., was entitled to a sum of Rs. 31,39,061 from Tungabhadra Pulp and Board Mills Ltd. This amount was shown as a debt due to Messrs. Straw Board Dealers in the accounts of the Tungabhadra Pulp and Board Mills Ltd., as on March 31, 1967; towards loan and commission accrued. The financial affairs of Tungabhadra Pulp and Board Mills Ltd. were in bad shape and, unless it was able to pay the amount owed by it to Messrs. Straw Board Dealers, there was an imminent danger of its being put into liquidation at the instance of Messrs. Straw Board Dealers in order to enforce their claim. When matters stood thus, in order to rejuvenate the Tungabhadra Pulp and Board Mills Ltd., Messrs. Salar Jung Sugar Mills Ltd., acquired 47% of its shares. The assessee, and his brother, Ratanlal R. A Morarka, also simultaneously purchased the claim of Rs. 31,39,661 of Messrs. Straw Board Dealers against the Tungabhadra Pulp and Board Mills Ltd. for an amount of Rs. 4,03,560. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew that the circumstances of the case clearly indicated that the assessee and his brother entered into the transaction of purchasing the claim of Messrs. Straw Board Dealers only with a view to save Tungabhadra Pulp and Board Mills Ltd. and not with any idea or scheme to earn profits. In that case, the Tribunal had also taken the view that the additional amount received over what was invested for the purchase of the claim from Messrs. Straw Board Dealers was only a casual, non-recurring receipt and not out of an adventure in the nature of trade. In the assessee's case also, the Tribunal found the circumstances of the case to be identical and held that the Appellate Assistant Commissioner was correct in accepting the assessee's claim that the amount in dispute was only income of a casual and non-recurring nature. The Tribunal has, at the instance of the Revenue, referred the two questions, as stated hereinbefore. According to learned counsel for the Department, the circumstances clearly indicated a scheme to earn profits. He submits that the assessee was a money-lender and was looking out for an opportunity to earn profits elsewhere. The assessee and his brother who had a controll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee, before he embarked upon the negotiations with D, had prior knowledge of the company's decision to pay up to Rs. 2,25,000 and utilised this prior knowledge to take up the assignment in his own favour was held by this court as indicative that it was a venture in the nature of trade upon which the assessee embarked. Said the court (p. 243) : ". . . By taking the assignment in his own favour, the assessee embarked on a venture, a venture on his own account. In view of his previous knowledge, he was, as it were, to use racing language, betting on certainty... " It was also found that the assessee did not possess the means to make the payment of Rs. 1,25,000 to D and, if the company had not satisfactorily settled his claim, he might have had to resort to litigation. In these circumstances, this court took the view that the assessee must be considered to have acquired the claim just as a trader acquires an asset or stock-in-trade with the expectation of making profit, but at the same time not ruling out possibility of making a loss. This case does not assist the Department, inasmuch as, in the present case, the Tribunal has found that the assessee's motive for acqui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... test to the facts of the present case, we are of the view that the Department has failed to discharge the burden placed upon them. The receipt of the money was not disputed. The assessee contended that this receipt was not the result of his embarking upon a venture in the nature of trade. He explained that his motive in purchasing the actionable claim was only to avoid Tungabhadra Pulp and Board Mills Ltd. being brought to liquidation by Messrs. Straw Board Dealers to enforce their huge claim. That the assessee was interested in Tungabhadra Pulp and Board Mills Ltd., not being embarrassed is obvious because of its intimate connection with the principal company, viz., Indian Sugar and Refineries Ltd. When the assessee set up this motive as the only motive for acquiring the claim, the burden squarely lay upon the Department to rebut it by cogent evidence which it has failed to do. Learned counsel for the assessee relied upon and drew support from the judgment of the Supreme Court in G. Venkataswami Naidu and Co. v. CIT [1959] 35 ITR 594. The Supreme Court in this case has laid down a number of indicia which would stamp even a solitary dive in the ocean of trade as a venture in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this case are apposite to the facts of the present case. In fact, the assessee's case here is on a stronger footing. Firstly, the profit was not realised within a short time as in the above case ; it was realised only after about 28 months. Secondly, the Department has hardly laid any material on record to rebut the declared motive of the assessee in purchasing the actionable claim. We must, therefore, accept the assessee's motive for purchasing the claim against Tungabhadra Pulp and Board Mills Ltd., as what he says it was, viz., to avoid embarrassment to the said company at the instance of Messrs. Straw Board Dealers. Nothing has been placed on record to detract from this suggested motive on the part of the assessee. As the Supreme Court said in Parimisetti's case [1965] 57 ITR 532 and as our court observed in Morarka's case [1981] 127 ITR 111, the Department has failed to discharge the burden of showing that the receipt was in the nature of income. In the result, we answer the first question in the affirmative and in favour of the assessee. The second question does not require an answer, as it is seen that, if the amount of Rs. 1,60,482 is deleted in assessing the total inc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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