TMI Blog1959 (5) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... KAPUR, J., delivered a separate judgment). SINHA, J.--- The only question for determination in this appeal by special leave is whether the solitary transaction in respect of about three-quarters of an acre of land in the suburbs of Calcutta, was an adventure in the nature of trade and, therefore, liable to income-tax. The assessee is the appellant. He challenges the correctness of the order of the Income-tax Appellate Tribunal, Calcutta Bench, Calcutta, dated March 26, 1954, passed in I.T.A. 5263 of 1953-54, in respect of the assessment year 1948-49, reversing that of the Appellate Assistant Commissioner of Income-tax, Range 'C', Calcutta, dated September 5, 1953. The facts of this case leading up to this appeal are as follows: The appellant is engaged in various types of business activities, being a shareholder and director or managing director of several limited liability concerns, and is also a partner in the firm known as Pioneer Engineering Works . In respect of his income during the previous two assessment years, the appellant was assessed to income-tax on the sums of ₹ 53,000 (1946-47) and ₹ 59,000 (1947-48). The appellant holds investments in sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Society another sum which, together with ₹ 32,748, already paid, would amount to 50% of the total price of the plot in question (within six months of the notice of de-requisition), he could get a conveyance of the property on his executing an English mortgage for the remaining 50% of the price carrying interest at the rate of 7%, on the expiry of these aforesaid six months. As there was an apprehension that the Government might acquire the whole property for its own purpose, it was further stipulated that in the event of such an acquisition by Government, the agreement for sale would stand rescinded, and the assessee, in that event, would be entitled to re-payment of the amounts paid by him to the Society by way of advance for the completion of the transaction. The assessee's case is that as the terms of the payment of purchase-price in several instalments, as aforesaid, were convenient to him, he agreed to take the plot on the conditions aforesaid, with a view to building a residential house for himself and constructing a workshop in connection with his business activity. At the end of the Second World War, the assessee's construction activities began to decl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 74,000 odd from the transaction in question, which, according to him, was an adventure in the nature of trade. Hence, on an examination of the assessee's accounts, the Income-tax Officer included the sum of ₹ 74,485 as profit from an adventure in the nature of trade ---taxable under section 10 of the Income-tax Act---as one of the items of income accrued to the assessee during the assessment year 1948-49. The assessee went up in appeal to the Appellate Assistant Commissioner of Income-tax, and challenged the conclusion of the Income-tax Officer that the sum of ₹ 74,000 odd was profit from an adventure in the nature of trade. It was also taken as one of the grounds of appeal by him that in any event, the receipt accrued to the assessee only in 1950, after the transaction of sale had been completed as between the Rani's nominee and the Society. The Appellate Assistant Commissioner did not agree with the Income-tax Officer that the assessee was not in a position either to complete the transaction of purchase by paying the full amount of consideration, or to erect a building thereon, or to use the land in any other way. He pointed out that under the sche ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... based its conclusion that the sale was an adventure in the nature of trade, and that the profits, thus made, were assessable to income-tax, on the following grounds : 1. That the payment by the assessee to the co-operative society of ₹ 32,748, came out of a loan taken for the purpose from a company (which conclusion, as already pointed out, is not borne out by the entries in the books of account of that company) ; 2. That the assessee could not have paid the balance of ₹ 98,000 odd, the outstanding amount of the purchase-money, to the insurance company; 3. That the assessee had no means to construct a house on the land; and lastly, 4. That the site itself fetched no income, thus, showing that it could not be an investment but only an excursion into the realm of trade. Against this decision of the Appellate Tribunal, the assessee moved this court and obtained special leave to appeal. Before we deal with the main question in controversy in this appeal, we would like to make some general remarks on the nature of the questions involved in this case. It is not disputed on behalf of the respondent that the question now before us is a question of law, or a m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving a similar question. Those decisions can be used only by way of illustrations of the different view-points which have a bearing on the decision of the case in hand. It has also not been disputed that in a case where a transaction under examination is not in the line of the business of the assessee, and is an isolated or a single instance of a transaction like that, the burden lies on the Revenue to bring the case within the words of the statute, namely, that it was an adventure in the nature of trade. That the onus is on the Department has been clearly laid down by Lord Carmont in the case of Commissioners of Inland Revenue v. Reinhold. That was a case in which the respondent, the assessee, was a director of a company carrying on the business of warehousemen, and had bought four houses in January, 1945, and sold them at a profit in December, 1947. He admitted that he had bought the property with a view to resale, and had instructed his agents to sell the same whenever a suitable purchaser was forthcoming. The assessee was made liable for tax in respect of the profit made by him on the resale. On an appeal by the assessee before the General Commissioners, it was contended on his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the land by laying the necessary roads and providing other amenities to the plot-holders. But as the Government did not release the property, and as the appellant was a businessman, who was interested in return from his capital, and as he had already paid ₹ 32,000 odd by way of advance towards the purchase price, and as in 1947, at the end of the Second World War, his business in contracts for building constructions began to decline, he, naturally, thought of making the best of the bargain. If he did not get out of the transaction, his financial difficulties in meeting his further liabilities under the agreement, as a result of slump in his main line of business, might lead to the forfeiture of the advance of ₹ 32,000 odd, he would naturally be on the look out for a good purchaser. He was lucky to find a lady with a lot of money to spare, who had, as he alleged, taken a fancy to the plot in question. Thus, he could assign to her the benefit of his agreement with the Society on terms which were highly profitable to him. There is no clear evidence in support of the inference of the Appellate Tribunal that the land was purchased with the sole intention of selling it later ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dunedin in the case of Jones v. Leeming at page 423: The fact that a man does not mean to hold an investment may be an item of evidence tending to show whether he is carrying on a trade or concern in the nature of trade in respect of his investments, but per se it leads to no conclusion whatever. The decision of the House of Lords in the case aforesaid, which is also reported in 15 T.C. 333, is rather instructive. In that case, the appellant was a member of a syndicate of four persons, formed to acquire an option over a rubber estate, with a view to selling at a profit. The option was secured, but the estate was considered to be too small for re-sale. An option over another joint estate was accordingly secured, and it was decided to re-sell the two estates to a public company to be formed for the purpose. Another member of the syndicate undertook to arrange for the promotion of the company. The syndicate's rights were transferred to a company. This company floated another company to which the properties were sold. The syndicate's profits were divided between the members, and the appellant, as one of the members of the syndicate was assessed to income-tax in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , have been noticed above, and the considerations which led those courts to hold that such ventures were not liable to income-tax, apply to the case in hand. On the other side of the line, there is a series of cases in which single transactions have been held to have been ventures in the nature of trade, for reasons which do not apply to the present case. We may notice some of the typical cases which illustrate the reasons for which a single transaction was brought within the ambit of a venture in the nature of trade. The case of Californian Copper Syndicate v. Harris, related to the purchase and sale of a mining property. In that case, a company had been formed for the purpose, inter alia, of acquiring and reselling a mining property. That company acquired some mining property and sold the same to a second company, consideration for the sale being paid-up shares of the latter company. It was held by the Court of Exchequer (Scotland) Second Division, that the difference between the purchase price and the value of shares for which the property was exchanged was a profit assessable to income-tax. It was pointed out by the court that the case involved a deal which was a proper tradin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, and a single transaction falls as far short of constituting a dealer's trade, as the appearance of a single swallow does of making a summer. The trade of a dealer necessarily consists of a course of dealing, either actually engaged in or at any rate contemplated and intended to continue. The case of Rutledge v. Commissioners of Inland Revenue, is another illustration of a case in which a single transaction of purchase and sale was held to be an adventure in the nature of trade for the reason that the commodity purchased was of such nature and of such a vast magnitude that it could not have possibly been intended for the consumption of the purchaser himself or his family. In that case, the assessee was a money-lender who was also interested in a cinema company. In the interest of his cinema business, he happened to be in Berlin, and there took the opportunity of purchasing, for a very cheap price, a very large quantity (one million rolls) of toilet paper for pound 1,000---and realised pound 12,000 by sale of that commodity. He was taxed on the net profit of pound 10,895. It was held by the Court of Session, Scotland (First Division), that it was certainly an adventure, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee's sole dealing in whisky, but all the same it was held to be liable to income-tax on the ground that the nature of the transaction, with reference to the commodity dealt in in large quantities, which would not ordinarily be meant for personal or family consumption, may indicate that it was an adventure in the nature of trade. We have set out the illustrative cases on the two sides of the thin line of demarcation that may possibly be said to distinguish one class of case from the other. The question still remains, on which side of the line, the present case should be placed ? The learned Solicitor-General placed strong reliance on the recent decision of this court in Venkataswami Naidu Co. v. Commissioner of Income-tax. The question, therefore, is whether the present case falls on the same side of the line as the recent decision of this court, which had to deal with a similar question, as already indicated. In that case, the assessee had purchased four plots under four different deeds. During the time that the assessee was in possession of those plots, he made no efforts to put up any structures, or to utilize them in other ways. The assessee was in a fiduciary posi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ward to continue his business in as prosperous a way as he had been doing in the recent past, and thus, to raise sufficient funds to build his own residential house, or to construct a workshop for his own engineering business. Hence, the possibility or the probability that the site may appreciate in value, would not necessarily lend itself to the inference that the transaction was a venture in the nature of trade, as distinguished from a capital investment. In all the circumstances of this case, the total impression created on our mind is that it has not been made out by the Department that the dominant intention of the appellant was to embark on a venture in the nature of trade, when he entered into the agreement which resulted in the profits sought to be taxed. For the aforesaid reasons, we would allow this appeal, and set aside the orders of the Tribunal below with costs. KAPUR, J.---I regret I am unable to agree that the appeal in the present case should be allowed and my reasons are these: On the facts which were proved the Income-tax Appellate Tribunal came to the conclusion that the purchase of land by the appellant was an adventure in the nature of trade and profit ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by this court that the question whether an adventure is in the nature of a trade or not is a mixed question of law and fact. The facts have to be found by the fact-finding authority and to those facts the law has to be applied and whenever it is necessary to get a correct finding on a question of fact it is the fact-finding authority which is called upon to consider the evidence and give its finding. (See Venkataswami Naidu Co. v. Commissioner of Income-tax). Therefore if there arose a question of law out of the order of the Appellate Tribunal then the appellant could have had the case stated to the High Court under section 66(1) and if the Appellate Tribunal refused to state the case it was open to the appellant to have the case stated under section 66(2) of the Indian Income-tax Act. No doubt he did make an application to the Appellate Tribunal to state the case under section 66(1) but he did not make any application to the High Court till 1957 after he had obtained special leave in this court and the High Court dismissed the petition on the ground that it was barred by time. The position comes to this that the Tribunal refused to state the case under section 66(1) of the Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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