TMI Blog1957 (5) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... tate a case on the aforesaid two questions. Appeal allowed. Case remanded. - C.A. 153 OF 1954 - - - Dated:- 22-5-1957 - Judge(s) : BHAGWATI., KAPUR., S. K. DAS JUDGMENT The Judgment of the Court was delivered by KAPUR, J.--This is an appeal by the assessee by special leave and the question for decision is whether questions of law, if any, arise out of the order of the Appellate Tribunal. The facts giving rise to the appeal are that the petitioner company was incorporated on 29th July, 1924, as an investment company, the objects of which are set out in clause III of the memorandum of association and more particularly in sub-clauses 1, 2, 15 and 16 of that clause. The assessment years under review are 1943-44 to 1948-49, excepting the year 1947-48. According to its petition made in the High Court of Bombay, the petitioner company dealt with its assets as follows : "The petitioner company purchased during the period 1st July, 1925, to 30th June, 1928, shares of the value of Rs. 1,86,47,789 major portion of which was comprised of shares in the Sassoon Group of Mills. During the year ended 30th June, 1929, the petitioner Company promoted two companies know ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee company made a claim every year for being treated as a dealer in investments and properties but this contention was consistently repelled and upto the assessment year 1939-40 the assessee company was assessed on the basis of being an investor but it appears that for the assessment year 1940-41 and the two following years 1941-42 and 1942-43 the Department accepting the plea of the assessee company treated it as a dealer in shares, securities and immovable properties and assessed it on that basis. For these years and for the assessment year 1943-44 the company made its return on that basis. But after the return had been filed for the year 1943-44, the assessee company withdrew its return and filed a revised return on 7th March, 1944, contending that it was not a dealer but merely an investor. Along with the return it filed a letter dated 6th March, 1944, in which inter alia it stated : "The return of total income which was submitted with the company's letter of 25th May, 1943, was prepared in conformity with the ruling of the Income-tax Officer in the 1940-41 assessment that the company was to be assessed as a dealer in investments. Since that return was submitted the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the objects contained in the memorandum of association and because of its assertion made in the past as being a dealer the assessee could not be held to be an investor. The company then applied to the Appellate Tribunal under section 66(1) of the Indian Income-tax Act for a reference of the following questions for the opinion of the High Court : "(1) Whether on the facts and in the circumstances of the case the assessee company can rightly be treated as a dealer in investments and properties ; and (2) Whether the profits and losses arising from the sale of shares, securities and immoveable properties of the assessee company can be taxed as business profits." This prayer was rejected because in the opinion of the Tribunal no question of law arose out of its order. It said : "The Tribunal did not decide this point merely because the company's memorandum of association gave power to the company to deal in investments and properties, but it was actually found that the company had dealt in investments and properties throughout and had also all along in the past asserted that it was a dealer in investments and properties." This was more than it had said in its appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vations were explained by Hamilton, J., in American Thread Co. v. Joyce as implying that by giving the material on which their finding was based the Commissioners were inviting the Court to determine whether on that material they could reasonably arrive at the conclusion on which they did arrive. The House of Lords on appeal categorically confirmed that the Courts had no jurisdiction over conclusions of fact except to see whether there was evidence to justify them and that proper legal principles had been applied. Lord Clerk in Californian Copper Syndicate v. Harris has laid down the test in the following words : "the question to be determined being--Is the sum of gain that has been made a mere enhancement of value by realising a security, or is it a gain made in an operation of business in carrying out a scheme for profit-making." In that case the objects set out in the memorandum of association pointed distinctly to a highly speculative business and the mode of actual procedure of the company was also directed in the same direction. Taking into consideration the course of dealing of the shares by the company and also that the turning of investment to account was not mere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s profits duty. From these facts it was concluded that they were carrying on a business. Atkinson, L.J., pointed out at page 204 that merely because a company is incorporated it does not necessarily follow that it is carrying on business. Its memorandum only shows that the company was incorporated for a particular purpose but taking into consideration the surrounding circumstances and facts of the case it was concluded that the company was carrying on a business. In Great Western Railway Co. v. Bater the question for decision was whether a clerk held a public office to fall within Schedule E. It was held that the determination by the Commissioners of questions of pure fact are not to be disturbed unless it should appear that there was no evidence before them upon which they, as reasonable men, could arrive at the conclusion which they came to. Lord Atkinson said : "What I have many times in this House protested against is the attempt to secure for a finding on a mixed question of law and fact the unassailability which belongs only to a finding on questions of pure fact. This is sought to be effected by styling the finding on a mixed question of law and fact a finding of fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being assessed as a farm and the other as a nursery. Viscount Simon laid down the test in the following words : "No doubt there are many cases in which Commissioners, having had proved or admitted before them a series of facts, may deduce therefrom further conclusions which are themselves conclusions of pure fact. But in such cases the determination in point of law is that the facts proved or admitted provide evidence to support the Commissioners' conclusions." It was also held that this question was a mixed question of law and fact. Du Parcq, J., in J. H. Bean v. Doncaster Amalgamated Collieries Ltd. held the following to be the test for determining whether the question is one of fact or law : "Unless the Commissioners, having found the relevant facts and put to themselves the proper question, have proceeded to give the right answer, they may be said, on this view, to have erred in point of law. If an inference from facts does not logically accord with and follow from them, then one must say that there is no evidence to support it. To come to a conclusion which there is no evidence to support is to make an error in law." In Edward v. Bairstow the respondent embarked ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with a broad definition of what are questions of law, ultimately the House of Lords decided that a "matter of degree" is a question of fact and it has also been decided that a finding by the Commissioners of a fact under a misapprehension of law or want of evidence to support a finding are both questions of law. The Privy Council in Commissioner of Income-tax v. Laxminarain Badridas, said : "No question of law was involved : nor is it possible to turn a mere question of fact into a question of law by asking whether as a matter of law the officer came to a correct conclusion upon a matter of fact." Bose, J., in Seth Suwalal Chhogalal v. Commissioner of Income-tax, stated the test as follows : "A fact is a fact irrespective of the evidence by which it is proved. The only time a question of law can arise in such a case is when it is alleged that there is no material on which the conclusion can be based or no sufficient material." Sufficiency of evidence was explained to mean whether the Income-tax authority considered its existence so probable that a prudent man ought under the circumstances of the case to act upon the supposition that it exists. The question for de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rinciples of law to the facts ascertained." The law was thus summed up at page 50 : "(1) When the point for determination is a pure question of law such as construction of a statute or document of title, the decision of the Tribunal is open to reference to the Court under section 66(1). (2) When the point for determination is a mixed question of law and fact, while the finding of the Tribunal on the facts found is final its decision as to the legal effect of those findings is a question of law which can be reviewed by the Court. (3) A finding on a question of fact is open to attack under section 66(1) as erroneous in law when there is no evidence to support it or if it is perverse. (4) When the finding is one of fact, the fact that it is itself an inference from other basic facts will not alter its character as one of fact." In the instant case the Appellate Tribunal in its appellate order has set out the amount of profits made by the assessee company in the years of assessment 1943-44 to 1948-49. It has also mentioned the inconsistent positions taken up by the assessee in first claiming to be a dealer and then to be an investor which according to the Tribunal was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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