Subba Rao, C.J.
1. The Income-tax Appellate Tribunal, Bombay Bench 'B', has referred to this Court the following questions under section 82(1) of the Hyderabad Income-tax Act :
'(1) Whether the provisions of the Hyderabad Income-tax Act in so far as they purport to levy a tax on income from jagir or Samsthan, are ultra vires and inoperative ?
(2) Whether there was evidence on which the Tribunal could have come to the conclusion that the sum of Rs. 75, 820 was the assessee's income from business ?
(3) If the answer to question No. 2 is in the negative, whether the assessee is entitled to claim as a revenue expenditure the money spent by him on the acquisition of the village of Madanapur, on the construction of houses, etc. and on the acquisition of 217 acres of land ?
(4) Whether the assessee is entitled to claim as a revenue deduction the sum of Rs. 70, 000 paid by him to Sridhar Reddy and his two sister ?'
2. As the learned counsel for the assessee confined his arguments only to questions Nos. 2 and 3, we would state the facts relevant to those two questions.
3. The assessee Raja Rameshwar Rao Bahadur was a jagirdar of the Wanaparti Samsthanam, Hyderabad. One of the villages in his jagir was Madanapur. The assessee, who was getting a small amount of Rs. 185 a year from that village, purchased the maktha rights of the makthadar of the lands for a sum of Rs. 25, 000 and constructed houses thereon at a cost of Rs. 26, 500. He also purchased the patta rights of the pattadars in an extent of 217 acres for a sum of Rs. 25, 502. Thereafter, he converted the land purchased by him into house sites and sold some of them in auction for a sum of Rs. 75, 820. The assessee's case before the Income-tax authorities was that he incurred the expenditure with a view to develop the village of Madanapur as an industrial and commercial centre of the Samsthanam, and, therefore, the amount spent by him for acquiring the village and the land should be deducted from his income under section 14(5)(a) of the Hyderabad Income-tax Act and that, at the same time, the income realised by him by selling the plots was in the nature of a capital receipt and therefore was a not part of his taxable income. The Income-tax Officer held that both the payments and receipts in connection with the improvement of the village had to be taken into account in ascertaining the expenses incurred by the assessee for the purpose of section 14(5)(c) of the Act. On appeal, the Appellate Assistant Commissioner held on the facts that the assessee by buying the land and, after parcelling it out into building sites, selling them was carrying on a business and, therefore, the income was not a capital receipt. Alternatively, he also held that the capital expenditure for the general benefit of the jagir could only be the net figure, i.e., the amount representing the difference between the amount spent by the jagirdar and the amount realised by him by selling the plots. In that view, he confirmed the order of the Income-tax Officer. On further appeal to the Income-tax Appellate Tribunal, the Tribunal also came to the same conclusion. They held that the idea of making a profits was there right from the beginning and that the assessee carried on a profit-making scheme. They also held that the assessee could not have it both ways, i.e., he could not claim that all the monies spent by him should be allowed as revenue expenditure and that all the monies that he realised should be treated as capital receipt. In the result, they agreed with the conclusion arrived at by the Income-tax authorities.
4. The first question that arises for consideration is whether there was evidence on which the Tribunal could have come to the conclusion that a sum of Rs. 75, 820 was the assessee's income from business. Section 2(4) of the Act definition business to include any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture. The definition is comprehensive enough to take in not only business strictly so-called but also an adventure or concern in the nature of a trade. Farwell, Lord Justice, in Hudson's Bay Co. v. Stevens laid down a test for ascertaining whether and under what circumstances the buying and selling of lands would amount to a 'business.' At page 437, the learned Judge state :
'It is clear, therefore, that a man who sells his land, or pictures, or jewels, is not chargeable with income-tax on the purchase or on the difference between the amount that he gave and the amount that he received for them. But if instead of dealing with his property as owner he embarks on a trade in which he uses that property for the purposes of his trade, then he becomes liable to pay, not on the excess of sale prices over purchases prices, but on the annual profits or gains arising from such trade, in ascertaining which those prices will no doubt come into consideration.'
5. The learned Judge later on gave the following illustration is support of his proposition :
'Again, a land-owner may lay our part of his estate with roads and sewers and sell it in lots for building, but he does this as owner, not as a land speculator........... It would be different if a land-owner, an individual, entered into the business of buying and developing and selling land; but the case of the owner, whether of land, or pictures, or jewels, selling his own property, although he may have expanded money on them in getting them up for sale, is entirely different; he sells as owner, not as trader.'
6. The aforesaid passage brings out in bold relief the distinction between the owner selling his on land by parcelling the same into plots and a person purchasing the land for the purpose of selling them for profit.
7. A similar question was considered by a Division Bench of the Madras High Court in Gajalakshmi Ginning Factory v. Commissioner of Income-tax. There, the assessee bought lands with a view to sell them and thereafter carried on operation so as to bring greater profit and facilitate the sale of the plots. The learned Judges, after considering the case law on the subject, stated their view at page 512 thus :
'As is often the case, each case must be decided on its own facts and no hard and fast rule can be laid down. That is the only 'principle' that emerges on an analysis of the decisions cited at the Bar.'
8. After noticing the definition of business, the learned Judges proceeded to state :
'It cannot be said that the sale of the plots by the assessee is trade or commerce in the ordinary sense of the term...... But what was claimed was that the transactions of the assessee in selling these plots were an adventures in the nature of a trade and, therefore it falls within the definition of business......... If a person buys lands with a view to sell them and thereafter carries on certain operations so as to bring greater profits and facilitate the sale of the plots, it can be said, if it is a single transaction, that his activity is an adventures in the nature of trade, for the essence of a trade, buying and selling for profit, is present in that activity. But of a person buys land with no intention of selling it and after a long different plots and also by laying out roads and providing other amenities with a view to get more price, it cannot be said that the activity which he carried on has any element of trade, commerce or business and it cannot be said, therefore, that it is an activity in the nature of a trade.'
9. The learned Judges laid down the following test to find out whether a transaction in a given case is trade or no :
'The intention must be that even at the time when the property was acquired, it was so acquired for the purposes of sale with a view to make profit.'
10. If we say so with respect, we entirely agree with the aforesaid observations.
11. Malik, C.J., and Seth, J., in Lalit Ram Mangilal v. Commissioner of Income-tax accepted the same test when they said that trade is an activity for the purpose of profit and, therefore, an adventures to be of the nature of a trade should have a profit motive behind it. It is not necessary to multiply cases. A single adventure in the nature of a trade is business within the meaning of the definition in the Income-tax Act. It will be trade if the adventures is conceived and carried out with a profit is an adventure in the nature of a trade, and, therefore, profit earned in that adventures is a taxable income.
12. Learned counsel for the assessee contends that the assessee had not profit motive in purchasing and selling the lands but the said transactions were part of the integrated scheme of developing the town of Madanapur as an industrial and commercial centre of the Samsthanam. Assuming that the objective of the jagirdar was to improve the town, can it be said that there is no profit motive in his undertaking The two objectives, namely, profit-making and improvement of a town, are not inconsistent and both can co-exist in a development scheme. The intention of the assessee could only be gathered from the facts found by the Tribunal. The assessee purchased the lands in his village, converted the same into house sites, sold them by auction and realised large amounts. They form part of the same scheme. The purchase of lands improving them by building house and shops and converting part of it into convenient house and shops and converting part of it into convenient house sites were obviously made to attract purchasers. In our view, the idea of developing the town and the manner in which it was done and indeed the entire scheme of development was conceived and carried out for earning profit, and, therefore, it was a venture in the nature of a trade.
13. That apart, the finding of the Tribunal to the effect that the assessee carried on a profit making scheme was a finding of fact. The jurisdiction of the High Court is confined only to questions of law. The Supreme Court in Sree Meenakshi Mills Ltd. v. Commissioner of Income-tax restated the legal position thus :
'1. When the point for determination is a pure question of law such as construction of a statue 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 pure 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 finding 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) an 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 will not alter its character as one of fact.'
14. A Division Bench of the Bombay High Court in Gustad Dinshaw Irani v. Commissioner of Income-tax held that as the finding of the Tribunal that the transaction was in the nature of a trade was based on other relevant facts and circumstances, the High Court would not interfere with that finding in a reference under the Income-tax Act. In the present case, the Tribunal found on the relevant facts that the assessee was carrying on business and that finding was based on facts that the ascertained by the Appellate Assistant Commissioner and accepted by the Tribunal. We cannot say that there is no evidence to support the finding or that it is perverse. The finding is, one of fact, not open to attack under any of the permissible grounds and, therefore, it is binding on us.
15. Learned counsel then contended that even if the assessee entered into an adventures in the nature of a trade, the profits could not be ascertained till the ventures came to an end and, in the present case, as the entire scheme was not out through, no taxable income accrued to the assessee during the accounting year. Reliance is sought to be derived for the aforesaid proposition from K.H. Mody, In re, and Commissioner of Income-tax v. A.K.A.R. Family. Kania, J., in the former decision stated at page 18 :
'The cases to which our attention has been drawn show that when there is a single venture, i.e., a single transaction which is treated as having been entered into in the nature of trade, the question of assessing the profits arose when the venture came to an end i.e., when the goods purchased were all sold.'
16. Much to the same effect was stated by a Full Bench in the latter case when the learned Judges at page 358 observes :
'The case of In re K.H. Mody is clear authority for the proposition that when only a part of the property has been sold, whilst the rest remind in the hands of the assessee, and might result in a profit or might result in a loss, and the whole transaction is not yet complete, no assessment can be made.'
17. So stated, the proposition appears to be unexceptionable. But, in the present case, at any of the stages of this long-drawn litigation neither this point was raised either directly or indirectly nor did the Tribunal refer the said question to this Court. Learned counsel argues that though this question was not referred to this Court specifically, it is involved in the question whether the assessee carried on business and, at any rate, the question of profit would be relevant evidence to ascertain that fact. We are unable to accede to this argument, for, the question whether a particular transaction is a business is distinct from the question whether the transaction is completed or has come to an end yielding profits or ending in loss during a particular year. We cannot, therefore, allow the assessee to raise this point for the first time before us.
18. It is then argued that the third question referred to by the Tribunal does not arise on the order of the Tribunal and, indeed, the Department did not at any time dispute the validity of the deduction raised by that question. In view of the opinion we have expressed on the second question, the consideration of the third question becomes unnecessary, But, as the point was argued at some length, we will express out view thereon. The question read :
'If the answer to question No. 2 is in the negative, whether the assessee is entitled to claim as a revenue expenditure the money spent by him on the question of the village of Madanapur, on the construction of houses etc. and on the acquisition of 217 acres of land.'
19. The Income-tax Officer allowed the claim of the assessee in regard to the amounts indicated in the question but rejected his claim to treat the sale proceeds of some of the lands purchased by him earlier as capital receipt. In effect, he had taken into consideration both the payments and receipts in connection with the improvement of the village for ascertaining the expenditure incurred by him in connection with the scheme. The Appellate Assistant Commissioner while holding that the assessee carried on business, also alternatively held that the capital expenditure for the general benefit of the jagir could be only the net figure and that, for arriving at the net figure, the receipts had to be taken into consideration. So too, the Tribunal observed in its order that the assessee could not claim that all the money that he realised should be treated as capital receipt. The contention of the learned counsel is, therefore, correct in a general way that the question of deducing the expenditure mentioned in the third question does not arise for the reason that the deduction of the expenditure incurred in a connection with the items mentioned in the question was never disputed and indeed was allowed by the Income-tax authorities and also by the Tribunal, But, we are satisfied that the question sought by the assessee and intended by the Tribunal to be referred to this Court is clearly one involving the dispute between the parties, namely, whether the grows or net expenditure incurred in connection with the scheme of improvement should be deducted from the jagir income. in the application filed by the assessee before the Tribunal, the following question was asked to be referred to this Court :
'Whether the receipt of Rs. 75, 820 on account of sale proceeds of Madanapur is capital receipt being chargeable to income-tax under the Hyderabad Income-tax Act ?'
20. By raising the question in this form, the assessee presumably attempted to side-track the dispute between him and the Department, namely, whether the alleged scheme of improvement of the village was really a 'business' carried on by him within the meaning of the Act, or, in the alternative, whether the amount of Rs. 75, 820 should be deducted from the admissible expenditure under section 14(5) of the Hyderabad Income-tax Act. The Tribunal, therefore, elaborated that real dispute between the parties by framing two questions, question No. 2 raising the dispute whether the scheme of improvement was a business and question No. 3 involving the alternative connection, namely, whether the gross incurred by the assessee without deducting the income derived by him under the same transaction could be claimed as admissible deduction from the jagir income. Though the intention was clear, the third question had not been property framed. The question ex facie raises the dispute whether the assessee was entitled to claim as revenue expenditure monies spent by him in connection with the matters mentioned therein. If the word 'expenditure' is understood to mean gross expenditure, the question brings out the real dispute between the parties for, as awe have already pointed out, the dispute was whether the assessee was entitled to claim the entire expenditure as admissible deduction under section 14(5) of the Act or only the net expenditure, i.e., the amount spent by him under the heads mentioned in the question minus the amount realised by him by selling the lands forming part of the scheme. The question whether the High Court can raise a new point of law which had not been referred to it by the Tribunal and give its opinion thereon - there is conflict on that question - need not be considered in this Court. The question in an ambiguous form has been referred to us and this Court is certainly entitled to re-frame it or amend the question in such a way as to bring out the real dispute between the parties. Though there is no express power conferred on the High Court to re-frame or amend a question, sub-section (5) of section 66 clearly implies such power, for the said sub-section enjoins on the High Court to decide questions of law raised by the statement of a case referred to it by the Tribunal. When the statement of a case raises a dispute, the incorrect phraseology or the input terminology used in the question cannot be in the way of the High Court amending the question in conformity with the dispute disclosed by the statement of the case. There is unanimity of judicial opinion implying such a power in the High Court to amend a question in suitable cases. See Mahabir Pershad Niranjanlal v. Commissioner of Income-tax U.P., Seth Ganga Sagar, In re, and Commissioner of Income-tax, Bombay v. National Mutual Association of Australasia. We, therefore, amend question No. 3 as follow :
'If the answer to question No. 2 is in the negative, whether the assessee is entitled to claim as a revenue expenditure the money spent by him on the acquisition of the village of Madanapur, on the construction of houses etc. and on the acquisition of 217 acres of land without deduction therefrom the sale proceeds of the plots sold by him amounting to Rs. 75, 820.'
21. The argument of the learned counsel on the said question may be stated thus. The assessee is entitled to invoke the doctrine of 'double advantage'. He claims an allowance under section 14(5) of the Hyderabad Income-tax Act for the expenses incurred in respect of the work of public welfare undertaken by him and seeks to escape taxation in respect of the sale proceeds on the ground of capital receipt. The former is allowed and the latter is not taxable under the income-tax law and so long as the law allows, the assessee is entitled to both the allowance as well as the exemption irrespective of any equitable considerations of their effect on the State Exchequer. The argument so stated is attractive. But, in our view, it is not applicable to the facts of the case. The material portion of section 14(5) on the basis of which allowance is claimed read :
'In respect of income from land revenue paid to the jagirdar by the holder of any non-Khalsa land in lieu of the use or possession thereof..... such income, profits and gains be computed after making the following allowance :-(a) all such expenses not being his private or personal expenses, which the assessee may incur in relation to such land or the inhabitants thereof, towards management or superintendence or on works of public welfare.'
22. The sub-section, among others, permits the deduction of allowances from taxable income in respect of expenses incurred by the jagirdar towards the management or superintendence or on works of public welfare, in relation to the land in respect whereof land revenue is payable to the jagirdar. The admissible deduction under the subsection is prima facie intended to afford relief to the jagirdar who incurs expenditure for constructing works of public welfare. A jagirdar may spend money for building a tank, houses for the poor, hospitals for the suffering and welfare centers for the needy, etc. They are all public utility services involving expenditure on the part of the jagirdar and the deduction allowed is not only just but is intended to induce him to embark on such schemes. We do not think the sub-section is intended to comprehend a scheme embarked on by a jagirdar primarily to make a profit by incidentally providing amenities for the public. But, as the Income-tax authorities and the Tribunal proceeded on the assumption that the section applied if the transaction was not a business, we shall test the claim of the assessee on that basis. What is admissible under section 14(5) is all the expenses incurred by a jagirdar on works of public welfare. In the present case, the work of public welfare undertaken by the jagirdar is to improve the village of Madanapur as an industrial and commercial centre. For the purpose, the assessee invested some amounts for purchasing lands and for building shops and, after providing the necessary amenities, sold the plots and realised large amounts. The entire scheme of improvement is an integrated one and the development is a continuous process till the scheme is completed. It is not possible, therefore, in such a scheme to predicate the expenses incurred unless both sides of the account are considered and the balance ascertained. The expenses incurred on the scheme is the amount in respect whereof the assessee is out of pocket and that can be known only after taking into account the amount realised in the course of the implementation of the scheme. The expenses incurred by him, therefore, is the difference between the sale proceeds and the amount spent by him in the first instance. In this view, the Tribunal was certainly justified in giving allowance only to the net expenditure incurred by the assessee on the scheme.
23. The cases relied upon by the learned counsel in support of the doctrine of 'double advantage' may now be considered. The leading case is that of the Court of Appeal in Hughes (Inspector of Taxes) v. Bank of New Zealand. The assessee, a bank registered and resident in New Zealand, claimed exemption from income-tax in respect of the interest from certain loans and at the same time included in its trading expenses to be deducted from profits the interest on the sums borrowed for acquiring the said bonds and others. The Court of Appeal held that the interest on the said bonds was exempted from taxation under certain provisions of the Income-tax Act and that the assessee was also entitled to include the interest on the amounts borrowed for acquiring those bonds under other provisions of the Act. It was contended before the Court of Appeal on behalf of the Crown that if the banks got the benefit of that exemption, they should be deprived of the advantage of deducting the sum spent by them for acquiring the said bonds, being the expenses attributable to the earning of the income which had been held immune from taxation. The argument on behalf of the Crown was succinctly stated at page 565 thus :
'In other words, it is said if the corpus-that is to say, the income - is to be excluded, the accessory - that is to say, the expense of earning it - ought also to be excluded.'
24. That argument was answered thus at page 56 :
'There is only one trade and we know exactly what are the expenses of that trade, and rule 3(a) of the Rules applicable to Cases I and II of Schedule D provide that the expenses of the trade, if the 'money is wholly and exclusively laid out for the purposes of the trade' are to be deducted. The result seems to be that the legislature in the Income Tax Acts has expressly provided for certain exemptions and exclusions which will operate when the profits of the trade are being dealt with under Case 1 of Schedule D and has, either inadvertently or by design, omitted to make any corresponding provision in respect of any allocation or apportionment of the expenses of the trade. In other words, when, for the purpose of taxation under Schedule D, Case I, you come to compute the profits, you have to exclude altogether this 7, 800 Pounds because there is, according to the view which the Court here takes, express exclusion of these profits, and that reduces one side of the computation, but when you come to the other task of ascertaining the expenses 'wholly and exclusively laid out for the purposes of the trade, ' you are faced with the total sum, and there is no provision for any apportionment.'
25. Greene, L.J., gives his answer much to the same effect but in a more succinct form at page 576 thus :
'When the statute says that interest is to be exempt I am quite unable to read it as meaning that in giving effect to that exemption by implication some repercussion is to take place on a different provision of the Act altogether.'
26. The raison d'etre is apparent. The Income-tax Act treats the entire trade as one, provides for the deduction of certain expenses incurred in respect of the trade and allows an exemption from taxation in respect of certain other income. There is no provision allowing the apportionment of the monies borrowed for earning the exempted income from and out of the general reading expenses deductible from profits. Though the assessee had double advantage, he was allowed to take advantage of both, as the provisions allowed him to do so. But, in the present case, the permissible deduction is only the expenses incurred by the assessee is only the net expenditure incurred by him. The argument based on an attempt to equate the expenses initially incurred by the assessee to the trading expenses and the sale proceeds to the exempted income may appear to be plausible but, on a deeper scrutiny, it is not sustainable. The provisions of the English Act provide for the ascertainment of the taxable income after deducting therefrom all the trading expenses and thereafter out of the net income certain exemptions are given in respect of the income from specific securities. But under the Hyderabad Act, what is deductible from the taxable income is the expenses incurred on a public work, and, therefore, for ascertaining the quantum of expenses, the entire work must be taken as an integrated one and cannot be split up into different transactions, one part yielding capital receipt and the other entailing deductible expenditure.
27. The decision in Central Provinces and Berar Provincial Co-operative Bank v. Commissioner of Income-tax is also a case where the assessee had borrowed monies for the purpose of taxable securities. The Nagpur High Court held that in computing the income under section 8 of the Income-tax Act, the Department was not justified in splitting up and apportioning the interest on borrowed capital between the taxable and tax free securities in proportion to the amount spent on the purchase of each kind of security and allowing deduction only in respect of the interest so apportioned to taxable securities. The first proviso to section 8 of the Income-tax Act exempts the payment of income-tax in respect of any interest payable on monies borrowed for the purpose of investment in securities by the assessee and it does not make a distinction between tax-free and taxable securities. Therefore, the whole interest on the monies borrowed was allowed to deducted and at the same time no tax was collected on the tax-free securities. The ground of the decision is found at page 483 thus :
'In our judgment the only way in which effect and meaning can be given to the proviso is by deducting these outgoings from the interest on the securities and taxing only so much of the remainder as is made taxable under the Act.'
28. As the proviso expressly allowed deduction from the entire interest, and, as there is no provision for allocating and deducting proportionate interest from the income from tax-free securities, the learned Judges decided in the manner they did. As the Income-tax Act is a fiscal measure and as such many of the provisions are necessarily arbitrary, they construed the provisions strictly. For the reasons we stated in discussing the decision in Hughes (Inspector of Taxes) v. Bank of New Zealand, this decision, also based upon two express provisions, one exempting certain income from taxation and the other providing deduction of interest on the amounts borrowed, is not of any assistance to construe the words 'expenses incurred on a public work' within the meaning of section 14(5).
29. The third decision relied upon by the learned counsel in Commissioner of Income-tax, Bihar and Orissa v. Ranchi Electric Supply Co. Ltd. turned upon the construction of the words 'actual cost to the assessee' within the meaning of section 10(5)(a) of the Income-tax Act. The learned Judges of the Patna High Court held that the words meant the actual cost incurred in installing service connection irrespective of any consideration as to the amount actually contributed by the company or the amount actually recouped ultimately from the consumers. There, the electric supply company incurred expenditure on the installation of a service connection. the learned Judges held that it must be treated as a capital expenditure and the company was, therefore, entitled to depreciation on that amount. At page 95, Ramaswami, J., say :
'The only point to be determined is what is the actual cost of installation of service connection and not what is the proportion of the cost which is contributed by the assessee or which is contributed by the consumers to whom service connection is given. that is the true meaning of the expression 'actual cost to the assessee' which occurs in section 10(5)(a). The conception of depreciation which is allowed under section 10(2)(vi) involves the conception of replacement of the particular machinery or of the particular service connection and examined from this standpoint also it is clear that the phrase 'actual cost to the assessee' which occurs in section 10(5)(a) of the Act must be interpreted to mean the actual cost incurred in installing service connection irrespective of any consideration to the amount actually contributed by the assessee or the amount actually recouped ultimately from the consumers.'
30. The decision turned upon a particular term used in the section and it is not of much relevance in considering the case before us.
31. We, therefore, hold that the word 'expenses' in the context of the work carried on by the assessee can only mean the amount which the assessee because out of pocket in carrying out the scheme. We answer the two questions accordingly. The assessee will pay the costs of the Commissioner of Income-tax, Hyderabad. Advocate's fee Rs. 250.