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TMI Blog1965 (12) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... ansferred to the company for an aggregate consideration of 16,50,000 Malayan dollars. In consideration of the transfer of these properties, the company allotted shares of the face value of Rs. 6,60,000 Malayan dollars to the partners of the firm of P.K.N. and the balance remained outstanding as a debt due by the company to the firm of P.K.N. On March 14, 1941, the company purchased a rubber estate called the Lee Estate for 2,62,655 Malayan dollars. On July 7, 1941, the company purchased for 5,000 Malayan dollars a house in co-ownership with another firm. In the years 1941 and 1942 some of the properties acquired from the firm of P.K.N. were sold by the company. Between 1942 and 1945 the territory of Malaya was under occupation by the Japanese forces, and it appears that during that period some houses belonging to the company were destroyed by fire. After 1945 some more lands admeasuring approximately 700 acres in the aggregate were sold by the company. On August 1, 1949, the State of Pudukottai integrated with the Province of Madras, and after the extension of the Indian Income-tax Act to that territory, the company was assessed by the Income-tax Officer, Pudukottai, as a dealer i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration of all the facts and circumstances which are brought on the record of the income-tax authorities. It has consistently been held by this court that the question whether profit in a transaction has arisen out of an adventure in the nature of trade is a mixed question of law and fact. " It was further observed : " .... the question whether a transaction is an adventure in the nature of trade must depend upon the collective effect of all the relevant materials brought on the record. But general criteria indicating that certain facts have dominant significance in the context of other facts have been adopted in the decided cases. If, for instance, a transaction is related to the business which is normally carried on by the assessee, though not directly part of it, an intention to launch upon an adventure in the nature of trade may readily be inferred. A similar inference would arise where a commodity is purchased and sub-divided, altered, treated or repaired and sold, or is converted into a different commodity and then sold. Magnitude of the transaction of purchase, the nature of the commodity, subsequent dealings and the manner of disposal may be such that the transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments of account of the company, it appears that large amounts of money were spent on cultivation and development of the rubber and cocoanut estates, and substantial income was derived therefrom. The total area of 3,000 acres originally transferred by the P. K. N. firm on the formation of the company was apparently not a compact block and the company was unable to administer the far-flung estates in different places effectively and economically, and on that account certain small plots of land were sold in 1940 and 1941. Between the years 1942 to 1945, the territory of Malaya was under Japanese occupation and during that period also some plots of land were sold. Thereafter in 1948, 1949 and 1950 lands were sold from time to time and profits were made. As a result of these disposals, the total holding of the company was reduced to about 2,000 acres of rubber estates, besides some houses acquired from the P. K. N. firm and the Lee Estate. The following table which has been incorporated in paragraph 8 of the statement of the case submitted by the Tribunal gives in the form of a tabulated statement the acquisitions and disposals from time to time : Year of account Purchase of proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its earlier decision that the company was carrying on business in real estate may be summarised. The company in the year of assessment 1951-52 realised a profit of 93,093.79 Malayan dollars from sale of rubber estates, 34,425 Malayan dollars from sale of house properties, 13,050 Malayan dollars from sale of jointly owned properties, and 150 Malayan dollars from sale of " cocoanut tops ", resulting in a net profit of 141,326.42 Malayan dollars ; that the subscribed capital of the company was 660,000 Malayan dollars, whereas the acquistion of properties in the first three years was more than 1,800,000 Malayan dollars ; that for acquiring its assets the company had of necessity to raise loans and to pay interest on those loans, and it was clear that the company was not formed solely for the purpose of acquiring assets of P. K. N. firm ; that the company made large borrowings for the purpose of acquiring those properties and developing them and there were continuous sale transactions practically in each year ever since 1939-40 ; that the contention that the company had to sell properties on account of political upheavals in the territories of Malaya could not be accepted, because no a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and the assessee was dealing with land as his stock-in-trade and carrying on business and making profits. In St. Aubyn Estates Ltd. v. Strick the appellant-company incorporated with powers to develop and dispose of lands and other property, acquired by purchase from the life tenant of a settled estate all the funds and properties subject to the settlement, including therein some twelve hundred acres of land adjoining a populous town. The company proceeded to develop a part of the land as building sites and to sell off portions of the estate as opportunities arose. Certain areas were laid out as desirable sites, involving expenditure on development by the company, and the developed sites were sold in plots to applicants. The General Commissioners decided that the profits from sales of lands were profits of a trade or business and assessable to income-tax, and the High Court declined to interfere with that conclusion. It was observed by Finlay J. : " When one looks at the memorandum and articles, when one looks at the inception of the company, when one looks at what the company in fact did, it did in fact purchase, it did in fact develop, it did in fact sell and it did in fact m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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