KUMARAYYA J. - This is a reference under section 66(2) of the Indian Income-tax Act, 1922. The question for decision is in the following terms :
'Whether, on the facts and circumstances of the case, the sum of Rs. 19,795 (Rupees nineteen thousand seven hundred ninety-five) which represents the difference between the prices at which the properties were purchased and sold by the assessee could be regarded as income liable to be assessed.'
On a former occasion when the case came up for hearing, this court, after hearing the parties, thought it necessary for a satisfactory decision, to require the Appellate Tribunal to furnish further information on the following two points : (1) whether the prices of the lands in the five instances were debited to the personal account of the assessee, or to the money-lending account or any other account; and (2) whether the separate account referred to in the statement of the case and in which the income from the lands and the expenditure therefor are said to have been entered included income from and expenditure for the agricultural lands also.
The Appellate Tribunal found that the required information was not readily available from the records of the case. It, therefore, entered into a further inquiry and, after going through certain account books filed by the assessee and hearing the parties, submitted a further statement on the above two points. The matter is now before us with this added material.
We may at the very outset remark that the supplementary statement is absolutely of no legal consequence as it is based on material that was not on record at the time when the Appellate Tribunal had first dealt with the case on the requisition of this court. It is too late in the day to argue otherwise as though the matter is still in doubt. The position that the supplementary statement called for under section 66(4) of the Indian Income-tax Act should be limited only to such material evidence as was already on record at the time when the Appellate Tribunal had disposed of the case but was not included in the statement of the case initially made is placed beyond the pale of controversy by the decision of the Supreme Court including the ruling Keshav Mills Co. Ltd. v. Commissioner of Income-tax.
With these preliminary remarks, we advert to the question to the answered. The fact which give rise to these question are few and simple. The assessee Hindu undivided family carry on money-landing business. In the course of the business it came to acquire certain agricultural lands from the debtors. These lands were held by the assessee for several years thereafter. Some of them were sold in the assessment year 1954-55 for which the previous year is the financial year, ending with March 31, 1954. As a result, an amount of Rs. 19,795 was realised in excess of what the assessee may be deemed to have paid for the same at the time he acquired the lands. These are all the admitted facts. The dispute is only in relation to the taxability of the said excess amount realised. Whereas the contention of the assessee is that these lands after acquisition were kept separate and the income realised therefrom did not go to argument the resources of the money-lending business, the contention of the department is otherwise. The Appellate Tribunal, to the finding of which finality is attached, as a matter of fact, found that the accounts of the money-lending business showed that the income received from these lands were credited to a separate folio in the account and the expenses including the tax relating to the said lands were also debited to a separate folio. The surplus realise however was not kept separate but it went to swell the capital of the money-lending business. Further, the expenses incurred in connection with the lands came out of general funds of the money-lending business which could not be separated from the surplus of the income from the lands which was included in the money-landing business account. The surplus was never credit to the personal account of the assessee but has gone only swell the cash available from money-landing purpose. Also it was never carried over in the books of account to the following year. In view of these various facts the Appellate Tribunal held that the lands formed part of the stock-in-trade of the money-lending business and the surplus resulting from the sale of land was therefore liable to tax. Even the supplementary statement file does not advance the case of assessee that they did not from the part of stock-in-trade. It is clear from that statement that the surplus of income of lands was never carried forward for the following year. Further, the agricultural expenditure was incurred from the cash balance is made up of money-lending receipts as well as other receipts including the sale proceeds of agricultural produce. There was never any distinction made between the income and expenditure of the agricultural lands which have been sold in the accounting year and also the other lands which were with the assessee. It is thus obvious that there was sufficient evidence on record in relation to the treatment of lands by the assessee after acquisition which is in direct conflict with the Alapati Ramaswami v. Commissioner of Income-tax. It is always a question of facts whether the property purchase by the money-lender in the discharge of loans advance by him forms part of stock-in-trade of his business. That must be depend upon whether, after purchase, he treated the properties as a part of the stock-in-trade of the business by his acts, such as, including the value of property in the accounts books, or charging the expenditure incurred in respect of the property to the business or treating the income derived therefrom as income of the business. It is clear from the facts of the presents case that there evidence to prove that the properties formed part of the money-lending business. Even after acquisition expenses were met out of the cash balance of money-lending business and the surplus income went to swell the money-lending capital. It is therefore an obvious case of the lands forming part of the stock-in-trade of the money-lending business of the assessee and the excess amount realise by sale thereof on that account is a taxable income. The rule in Varada Reddy v. Commissioner of Income-tax, to which again one of us was a party, follows the rules in Alapati Ramaswami and there is nothing in that decision that would support the case of the assessee. The result is that the answer to the question referred to must be necessarily an affirmative. It is answered accordingly. The assessee shall pay the cost of the department. Advocates fee is fixed at Rs. 100.
Question referred answered in the affirmative.