1. This is reference under sub-section (1) of section 66 of the Indian Income-tax Act and the question referred to this court is in the following terms :
'whether, on the facts and in the circumstances of the case, the inference drawn that the sum of Rs. 90,125 was profit from an adventure in the nature of trade is valid in law ?'
2. The question arised thus : The assessee is registered partnership firm of six partners carrying on business of importers of piece goods merchants on wholesale basis. We are here concerned with the assessment year 1952-53, the relevant previous year being one ending with 31 st March, 1952. At an auction held on 4th October, 1944, the assessee had secured from the Government a right to obtain a lease of a plot of land bearing No. 25 in the Back Bay Reclamation. The right was acquired in the name of one Shamdas, one of the partners of the assessee firm. One of the conditions of the auction material for the purpose of this case was :
'That he (assessee) will within six months from the date of termination of the present war or the removal of restrictions on the construction of building contained in the Building (Control of Construction) Order, 1943, whichever is earlier submit to the Chief Engineer to Government for his approval the specifications, plans elevations, section and details of the building and compound walls hereby agreed by the Licensee to be erected on the said land...'
3. The second material condition was :
'That he (assessee) will within the period of four years from the date of termination of the present war or the removal of restrictions on the construction of building contained in the Building (Control of Construction) Order, 1943, whichever is earlier at his own expense and at a cost of not less than Rs. two lakhs and in all respects in substantial and workmanlike manner and with new and sound materials of the best description of their several kinds... build and completely finish fit for occupation on the said plot of land a building with all requisite and proper drains and other conveniences thereto and in like manner will erect compound walls on all the boundaries of the plot on which such walls do not already exist.'
4. In the year 1948 the assessee was put in possession of the plot. On 21st November, 1951, the assessee sold the right to obtain a lease of the said plot from the Government for a consideration of Rs. 1,03,740. The assessee till that date had expended certain amounts in relation to the said plot by way of annual payment at Rs. 6,000. The difference between the consideration of the sale and the amount so expended by the assessee amounted to Rs. 90,125 and it is this amount which is in dispute. The contention of the assessee before the Income-tax Officer was that the sole purpose of obtaining the lease rights was to build a residential house for the partners, who were then living in rented flats and the reason why the right to get the lease was sold was paucity of finance and the partners considered instead of constructing the building. The Income-tax Officer did not accept the contention of the assessee but on the other hand held that the assessee had obtained the lease rights solely with the intention of transferring them at profit. The lease rights were obtained during the war time and the assessee was sure that the demand for open plots would be fetching in the post-war period higher prices; as such the assessee would be in a position to make a good profit by transferring the said plot when an opportunity came. The facts on which this conclusion was based by the Income-tax Officer were see did not chose to construct a building but instead invested the funds in a new business. According to the Income-tax Officer the sole intention of the assessee in obtaining the leasehold rights was to sell them at profit. He, therefore, included the profits in the total amount of his business. The assessee had, in act, started a new business 'Mohan Dyeing & Weaving Mills' with the funds made available to it by the sale of the lease rights. Assessee took an appeal to the Appellate Assistant Commissioner and before the Appellate Assistant Commissioner the assessee again reiterated his contention. The appeal, however, was dismissed. The Appellate Assistant Commissioner held that the assertion made by the assessee that he had obtained the rights with a view of building a residential house was not borne out by the facts of the case. The rights were obtained in 1944. They were sold in 1951. Though in the intervening years the assessee had made good profits, yet during all the 6 1/2 years the assessee had not built the building on this plot of land. Having regard to the war years, the Appellate Assistant Commissioner held that the assessee had obtained the rights during the war years with a view to sell them at profit as the assessee full well knew that the prices would rise. In support of his conclusion the Appellate Assistant Commissioner also relied on a decision of this court in Gusted Dinshaw Irani v. Commissioner of Income-tax. The assessee took a second appeal to the Tribunal and the Tribunal also dismissed the said appeal. Before the Tribunal, it appears, it was contended that at the time of obtaining the right to obtain a lease the assessee had assets amounting to Rs. 6 lakhs and, therefore, the assessee's contention that he wanted to build on the plot should have been accepted. This argument was repelled by the Tribunal by pointing out that the cash available to the assessee at that time was only Rs. 8,000. On the material before it, the Tribunal has held that in its view this was clearly a venture in the nature of trade and the intention at the time of acquisition of the rights being only to sell it later for a profit. In this view of the matter the Tribunal confirmed the order of the income-tax authorities. At the instance of the assessee the aforesaid question of law has been referred to this court.
5. Mr. Mehta, learned counsel appearing for the assessee, contends that the income-tax authorities as well as the Tribunal were in error in holding that the transaction was an adventure in the nature of trade. According to him the rights to the plot were acquired by the assessee with a view of constructing building thereon, but on account of the difference between the partners the building could not be put up. Four out of the seven partners had gone out and, therefore, the remaining partners though it advisable that the money obtained by sale of this right should be invested in business. He further contended that the authority of Gusted Dinshaw Irani v. Commissioner of Income-tax, on which reliance was placed, now stands shaken by a recent decision of the Supreme Court in Saroj Kumar Mazumdar v. Commissioner of Income-tax.
6. It is not possible for us to accept the contention raised by Mr. Mehta. It is well settled that the mere fact that the property was purchased with the intention of selling it at a profit is not conclusive on the question whether an isolated transaction of purchase and resale is an adventure in the nature of trade. In each case it is to be an inference drawn on the facts of that particular case. The facts in Gusted Dinshaw Irani v. Commissioner of Income-tax were very similar to the facts of the present case. They were : The assessee who was a partner in several firms doing restaurant business in Bombay obtained a plot of land in a municipal scheme in 1946, on the terms that he should erect a building on the plot costing not less than Rs. 75,000, that he paid an annual rent of Rs. 3,388 and that when the building was constructed the plot would be plot would be leased to him by the municipality for 999 years. In 1950 he assigned his rights for Rs. 32,011. The Tribunal, on the facts placed before it, held that the transaction of purchase and resale was an adventure in the nature of business and assessed the profits to income-tax. On a reference the matter came before this court. After considering the relevant decisions, the learned Chief Justice, at page 97 of the report, observed :
'Applying this test here, the commodity in which the moneys have been invested by the assessee is not a commodity usually utilised for the purpose of investment. One may invest in property, one may invest in shares, but one does not usually invest in an agreement to lease which has got to fructify into a lease after the building has been constructed. The second test suggested by Lord Carmont was also not satisfied in this case. There is no annual return from the property in which the investment has been made. The assessee had to pay ground rent and no question of any return arose till the property had been built. Therefore, in our opinion the decision relied upon by Mr. Palkhivala is not of much assistance. We agree with him that the mere fact that a person buying property wished to resell it and realise profit by the resale is not conclusive on the question as to whether the transaction is in the nature of trade or is in the nature of a capital investment. But, in our opinion, in this case there are other circumstances besides that one circumstances, and the Tribunal was fully justified in coming to the conclusion that it did.'
7. From this decision it is clear that if, before the Tribunal, there were relevant facts besides the fact of purchase and resale, it is open to the Tribunal to come to the conclusion that the transaction was in the nature of trade - even though the transaction may be an isolated transaction - in a sense that the transaction was not a transaction which ordinarily takes place in the normal course of the assessee's business and if there be such relevant material, then this court will not ordinarily take a different view even if a different view is possible. As already stated, here, in the instant case, besides the fact that the assessee, after obtaining the right, had sold it, there are other facts. The assessee, who claims to have obtained the right with a view to build building for residential purposes of the partners, had not built them for a period of over three years even though the possession of the plot was obtained by the assessee in the year 1948. It is found as a fact that the assess had funds during that year. It is also found as a fact that at the time the assessee secured that right, the assessee had no sufficient funds to construct the building worth about 4 lakhs. It cannot be said that these are not relevant prices of evidence on which the Tribunal could not have reached the conclusion to which it has arrived or that the facts were not relevant to the conclusion to which the Tribunal has reached. That being the position, in our opinion, answer to the question referred to us will have to be against the assessee.
8. The facts of the case on which reliance is placed by Mr. Mehta were that the assessee in that case was engaged in various types of business activities. He was also a shareholder-director of several companies and was also a partner in a firm of engineering works. With a view of acquiring a plot of land for the purpose of building residential house for himself and the construction of a workshop in connection with his business activities, the assessee had paid Rs. 32,748 to a society being 25% of the estimated price of the plot of land comprised in a land development scheme undertaken by the society. At that time, however, the area which th society had acquired was not in possession of the society but was requisitioned by the Government for the purposes connected with the prosecution of the Second World War. The assessee had undertaken to build within a period of six months of the lands being released from Government occupation. Later on he sold the rights obtained by him by virtue of the agreement with the society to another for a consideration of Rs. 1,07,000. The question arose whether the transaction was an adventure in the nature of trade and whether the profits made in the transaction was an adventure in the nature of trade and whether the profits made in the transaction were liable to be taxed in the hands of the assessee. The income-tax authorities as well as the Tribunal had held against the assessee. The matter was taken directly to the Supreme Court on appeal from the decision of the Tribunal. After reviewing certain authorities, their Lordships of the Supreme Court observed :
'... the line of demarcation between cases of isolated transactions of purchase and sale being ventures in the nature of trade, and those which are not such ventures, if any, is very thin, and each case will have to be decided on its own facts.'
9. Then their Lordships proceeded to examine the facts of that case. After examining the various facts, their Lordships observed (page 254) :
'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.'
10. The facts in that case as summarised in the judgment at page 249 were as follows :
'Though the appellant is engaged in various types of business as a shareholder or a director in limited liability concerns, as also in building contracts, dealing in landed estates is not in the line of his business. If such a transaction were in the line of his business, it would not matter much whether, in the assessment year, he had several such transactions or only one... When he entered into the agreement with the society for the purchase of the plot, in January, 1946, he had expected that at the end of the World War, the Government would release the property from its requisition and that the society will develop 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 Rs. 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 the 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 Rs. 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 fact 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 at a profit.'
11. It will be clear that the facts of this case are entirely different form the facts of the case with which we are dealing. There at the time of the purchase the assessee had incurred an expenditure of considerable amount. It has been found that he wanted to build a residential house and a factory for his business. He expected that the land would be released by the Government but the land was not so released. His business was running in loss and in these circumstances he had sold the land. On these facts it has been found that the transaction was not an adventure in the nature of trade. The facts in this case are that at the time of obtaining the right, the assessee had expended nothing. The assessee had got possession of the property and for over three years the plot was with him. Under the agreement he had undertaken to submit plans within six months and complete the building within a period of four years. He has done nothing in that direction even though, as it has been found as a fact, he had the means to do so. On the other hand, finding the rise in the market, he has sold the land at a considerable profit. On these facts an inference has been drawn by the Tribunal that the transaction was an adventure in the nature of trade. It cannot be said that the conclusion reached is without any evidence. Merely because another view may possibly be taken it cannot be a ground to interfere with the conclusions arrived at by the Tribunal in exercise of our jurisdiction under section 66 of the Act. We have to keep in mind that we are not exercising appellate jurisdiction.
12. For reason stated above in our judgment, the answer to the question must be in the affirmative. We answer accordingly. The assessee shall pay the costs of the commissioner.