TMI Blog1978 (3) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... e from property, etc. He owns bangalow at Vepery, Madras, and resides therein. He also owns race horses which are entered for various races and sent to stud on occasions. There were two disputes relating to the assessment for the assessment years 1963-64 to 1966-67. One of them related to losses incurred by the assessee in each of the years in connection with the maintenance of race horses and the activity connected with racing. It is seen from the affidavit filed by the assessee as also the order of the Tribunal in the appeals relating to assessment to expenditure-tax for the assessment years 1964-65 and 1965-66 which have been made part of the record, that the assessee was maintaining race horses during the assessment years and incurred in the assessment year 1964-65 expenses to the extent of Rs. 1,05,909 and in the assessment year 1965-66 the expenses were Rs. 1,19,856. The expenses related to insurance of race horses, entry forfeits, mount fees, jockey expenses, horse feeding charges, stable rent, medical expenses, transportation of horses and miscellaneous horse expensed. He had received during the assessment year 1964-65 a sum of Rs. 67,808 and in the assessment year 1965-6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty was Rs. 94,670. The assessee divided these plots into three parts and sold the same under three sale deeds dated January 23, 1965, May 3, 1966, and June 16, 1965, for Rs. 72,500, Rs. 42,200 and Rs. 20,000, respectively, realising a total sum of Rs. 1,34,700. The total surplus was (Rs. 1,34,700 Rs. 94,670) Rs. 40,030, which was allocated between the assessment years 1965-66 and 1966-67 at Rs. 25,209 and Rs. 14,801, respectively, in proportion to the sale price realised in the respective years. According to the assessee, he was residing in a small house and felt that he should have a more comfortable and suitable house in a better locality and that he had purchased the plots with a view to construct residential house. But he had to abandon the plan as the liquid resources available were not sufficient and in the meanwhile the cost of construction also rose steeply. The case of the assessee, therefore, was that the amount spent on purchasing the plots was an investment and the surplus realised by him should be considered as a " capital gain ". This was rejected by the ITO and the AAC on the ground that since the assessee had his own house to reside at Vepery, there was no need ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [FB] and after a review of some other cases, that the receipts of the assessee from his racing and betting activities in the two years in question constituted his income, that it was not income from any business, profession or vocation of his, but it was " income from other sources " within the scope of s. 6 of the Indian I.T. Act, 1922, and that it was not taxable income as it was income of a casual and nonrecurring nature within the scope of the exemption granted by s. 4(3)(vii) of the Act. This decision squarely applied to the facts of the present case and the decision of the Tribunal is against the view taken therein. The learned counsel for the assessee tried to distinguish this case on the ground that while in the decision in Syed Jalal Sahib v. CIT [1960] 39 ITR 660 (Mad) the income of the assessee included income from entering his horses in races as also income received by his betting on his horses as also on others' horses, in the instant case the income received by the assessee was only from racing activities. He also relied on certain passages in this judgment, wherein the learned judges have repeatedly pointed out that they shall not be understood as holding that gam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39 ITR 660 (Mad) for the proposition that the income referable to the racing activity would be income from " other sources " the Tribunal had not kept in mind that this court in the same decision and the Allahabad High Court in Lala Indra Sen, In re [1940] 8 ITR 187 [FB] also held that such income is of a casual and non-recurring nature and, therefore, exempt from taxation under s. 4(3)(vii) of the Indian I.T. Act, 1922. We are in respectful agreement with these two decisions. As pointed out in these decisions, the success of a horse or that of bet is obviously uncertain and wholly a matter of chance and the receipt dependent on such chance can never be anything but casual. In this respect, whether it is a racing activity or a betting activity, in our opinion, makes no difference. The horse winning a race and the individual winning a bet are both equally uncertain and wholly a matter of chance. The distinction pointed out by the learned counsel for the assessee is therefore, of no consequence whether it is racing of horses or betting on horses. Both are gambling and the chances of a horse winning and the person winning a bet are so uncertain that the receipt of any income thereon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laid down the principles that have to be kept in mind in deciding whether a transaction of purchase and sale amounts to an adventure in the nature of trade and they are, in the words of the learned judges, as follows (p. 210): " (1) The commodity purchased plays an important role in deciding whether a person was indulging in an adventure in the nature of trade or was making an investment, (2) whether the transaction was an isolated one or formed part of a series of transactions showing a tendency to indulge in trade is another important factor, (3) the fact that the property bought has been sold within a short time does not by itself indicate that the transaction was in the nature of trade, (4) if land has been purchased or commodity which normally is not treated as a stock-in-trade has been purchased, the presumption is that the intention was to make an investment and not to indulge in an adventure in the nature of trade, and (5) if the property purchased was capable of yielding income then again the inference was that, an investment was intended and not an adventure." Thus, the decision on a question whether a profit made by the assessee by selling land is profit from " busi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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