V.S. Desai, J.
1. This is a reference under section 66(1) of the Income-tax Act at the instance of the Commissioner of Income-tax and the question which arises for consideration on the reference is 'Whether, on the facts and in the circumstances of the case, the trustees could be treated as dealer in shares for the assessment year 1955-56 ?' On the 26th January, 1929, Lady Wadia executed a will, under clause 7 of which she left three properties solely for her grandson, J. B. Wadia. Under the said clause, the trustees appointed under the will were prohibited from selling the properties. On the 25th September, 1929, Lady Wadia executed a codicil, under which she have power to the trustees to sell the properties and invest the proceeds in shares and securities. Under clause 24 of the will, power had been given to the trustees to invest moneys in their names in certain investments from time to time. Lady Wadia died on 14th April, 1930, and the will took effect on that date. The trustees, in pursuance of the power conferred upon them under the will, realised the properties and invested moneys in investments which they also varied from time to time. During the calendar year 1954, which was the previous year relevant for the assessment year 1955-56, they sold some of the shares held by them and the sale resulted in a surplus of Rs. 27,811. Now, these sales which were effected in the year 1954 were of four blocks of shares held by the trustees - one of the four blocks was held by them since the year 1946 and the other three were acquired in the year 1951. At the date of the sale, two of these three blocks acquired in 1951 had been sold within three years of their purchase and the third a little beyond three years. In making the assessment for the year 1955-56, the Income-tax Officer included the entire surplus of Rs. 27,811 as taxable income treating the trustees as a dealer in shares. In the appeal which was filed by the assessee against the assessment order to the Appellate Assistant Commissioner, the surplus realised on the two blocks of shares which were sold within a period of three years of their acquisition was treated as income from dealing in shares and the surplus on the other two blocks was considered as capital gain, relying on a decision of the Appellate Tribunal in a certain other case, in which the Tribunal had taken the view that if the interval between sale and purchase was more than three years, it should be considered as capital gain, but if it was less than three years, it should be regarded as a profit. The Appellate Assistant Commissioner accordingly held that an amount of Rs. 14,152 out of the surplus was only assessable to tax, the balance being in the nature of capital gain. Against the decision of the Appellate Assistant Commissioner, the assessee took a further appeal to the Tribunal. The Tribunal on the facts and in the circumstances of the case tool the view that there was no proof of the trustees having had an intention to make a profit when they purchased the shares and that all that they did was to change the investments in the best interests of the trust as directed by the testator. According to the Tribunal, the entire amount of Rs. 27,811 was a capital gain and no part of it was income liable to tax in the assessment year 1955-56. It accordingly allowed the appeal of the assessee. Then, at the instance of the Commissioner, it drew up the statement of the case and referred to this court the question which we have already stated.
2. In our opinion, the view that the Tribunal has taken is on the conclusions that it has arrived at on the facts of the case and no error of law has been committed by it in arriving at the said conclusions. Under the will, the trustees were directed to make investments in any of the investments specified and they had also been given power to vary the investments in the best interests of the trust. In pursuance of this power them trustees have made the investments and they have also varied them from time to time as they deemed fit in the interest of the trust. It is no doubt true that simply because the will directed the trustees to make investments, it would not follow that the dealings indulged in by the trustees were necessarily investments and not dealings in shares and the question whether the activity of the trustees was to make investments or to deal in shares will have to be determined in the light of the facts and circumstances of the case. It was urged by the learned counsel for the revenue that the frequency of the transactions would be circumstance indicating that the dealings were with a view to make profit by way of business and he has pointed out that three blocks of shares have been disposed of within a period of three years after their acquisition. Investments by trustees, says the counsel, will be for a long period and, although they have power of varying the investments, the power will ordinarily not be very frequently exercised. On the record in the present case, we have variation in respect of only four blocks of shares. One block of shares had been held by the trustees since the year 1946 and the rest from the year 1951. The mere circumstance that the investments in three of the four blocks were disposed of within a period of three years or so would not, in our opinion, be sufficient to characterise the action as dealing in shears.
3. It is next pointed out that the beneficiary has some dealings in shares himself and, since he is also one of the trustees and the investments are for his benefit, variations of the investments in the present case by the trustees may have been influenced by the advice given by the beneficiary with a view to making profit by dealing in share business. The circumstance pointed out is again of an inconclusive character and does not warrant a necessary inference such as is suggested on behalf of the department. Moreover, both of these circumstances were pointed out to the Tribunal and it has taken the view that they are not sufficient to come to the conclusion that the intention of the trustees in varying the investment was to deal in shares. Since neither if the circumstances is such as taken itself or along with the other a conclusion contrary to that arrived at by the Tribunal must necessarily follow, no error of law can be said to have been committed by the Tribunal in arriving at its decision.
4. In our opinion, therefore, our answer to the question is in the negative. The Commissioner will pay the costs of the assessee.
Question answered in the negative.