Prakash Narain, J.
(1) This reference has been made by the Income-tax Appellate Tribunal, (Delhi Branch 'A') under section 66(1) of the Indian Income-tax Act, 1922. Along with the statement of case forming part thereof the Tribunal has also attached a copy of the original assessment order by the Incometax Officer, a copy of the order of the Appellate Assistant Commissioner upholding the assessment, a copy of the Tribunal's order dated September 13, 1960, remanding the case in the appeal was filed to it to the Income-tax Officer for some further enquiry, a copy of the remand report of the Income-tax Officer dated January 24, 1954 and the final order of the Tribunal in appeal. Thus, the statement of case and other documents attached to it and forming part thereof have all to be seen to find out what are the facts of the case and contentions of the parties.
(2) A perusal of the documents placed before us shows that the reference has arisen in the following circumstances. The assessed is a limited liability company and owned some cement factories in India as also in areas now forming part of Pakistan in the relevant assessment year which is 1952-53, the corresponding accounting period being the calendar year 1951. During the Second World War Mr. R. Dalmia was consulting: M/s. F. L. Smidth & Co. (Bombay) Private Limited in respect of his plan for development of cement factories owned and controlled by the assessed and other companies with which Mr. Dalmia was directly or indirectly associated. In January 1945 one of the engineers of M/s. F.L. Smidth & Co. visited Mr. Dalmia in New Delhi and later that year the plans took definite form in respect of the proposed developments. Orders were placed on M/s. F.L. Smidth & Co. for supply of machinery for four plants in 1946 to be erected at Shantinagar, Dandot, Dalmianagar and Dalmiapuram. The original orders were not placed on the record but according to the agreed statement of case prepared by the Tribunal the order for the machinery was placed with M/s. F.L. Smidth & Co., Copenhagen on 7-2-1946. As already noticed, the four plants were ordered for the cement factories at the four places mentioned above. Prior to that, however, on 19-4-1945 Mr. S.P. Jain, in response to a letter from the Government of Orissa State had indicated that he would be interested in the Orissa Governments proposal for putting up a cement factory in Orissa on supply of certain particulars. It seems that about that time the Orissa Government was contemplating putting up a cement factory in Orissa to supply cement for the Hirakud Dam Project. Nothing further seems to have been done in this respect till much later. In the mean time on 6-8-1947 M/s. F. L. Smidth & Co. addressed a letter to the assessed acknowledging order placed by the assessed-company for the supply of machinery for the four places mentioned above. This letter sets out, apart from other things, the sequence of the delivery of the plants for various places, the price and the time of the delivery. The supply of the Dandot plant was to be made in various months from February, 1948 to October, 1948. It is not in dispute that supplies in respect of these four plants ordered by the assessed had not commenced till 15-8-1947 by which date Pakistan had come into existence and Dandot fell in the area of Pakistan. From the letter dated March 9, 1963 written by M/s. F.L. Smidth & Co. to the Income-tax Officer, Special Investigation Circle-C it is apparent that on account of the partition of India the machinery for the works in Pakistan which till then had not been supplied was kept back. In the mean time it appears negotiations continued with the Orissa Government for the installation of a cement factory in Orissa. By letter dated 25-11-1947 enquiry was again made by the Government of Orissa from Mr. S.P. Jain of Rohtak Industries Ltd., which was a concern with which Dalmias were connected, if he would be interested in putting up a plant at Orissa. Mr. Jain replied to this enquiry by his letter of 5-12-1947 in which he wrote :
(3) We have got a cement plant for which we placed order a couple of years back and delivery of which will be due much early. We shall be willing to put one of those plants in Orissa provided we get suitable terms.' Thereafter a meeting was held on 8-1-1948 in which the General Manager of the assessed company, the Chief Engineer Hirakud Dam Project and one Dr. H.B. Mohanty were present. Discussions were held between the various persons present and a note of discussions has been attached with the statement of case as enclosure I' of Annexure D. It is recorded in this note that the assessed had ordered machinery for replacing their cement plants and the said machinery was expected to be shipped at an early date and parts of it would start arriving in March 1949. The complete supply of the plant was estimated to take about six months and if the negotiations are fruitful the first lot of cement could be supplied by the beginning of 1950. Various other things regarding the company to be floated were discussed and the shares that the promoters, namely, the assessed and the Orissa Government were to have. Mr. Roy who was representing the assessed at this meeting insisted, it is recorded, that a final decision should be taken at an early date so that the machinery that had to be shipped from abroad could be diverted depending upon the decision to the Calcutta or the Bombay Port. These negotiations proving fruitful the assessed acquired the import license to import the machinery in India and informed M/s. F.L. Smidth & Co. about it. In September, 1948 the assessed wrote to M/s. F.L. Smidth & Co. that the plants meant for Shantinagar and Dandot. were now to be diverted to the Indian Union and the Dondot plant was to go to Orissa. On 23-12-1948 a formal agreement was entered into between the Orissa Government and M/s Dalmia Jain Agencies Ltd. for the putting up of the plant at Orissa and the supplies of machinery were thus to diverted to the new Company promoted by the assessed and the Orissa Government under the name and style of Orissa Cement Ltd. As already noticed, M/s. F.L. Smidth & Co. had already been instructed to divert the shipments to Orissa and thus on receipt of the machinery at Orissa Cement Ltd. the assessed debited the cost of machinery to Orissa Cement Ltd. and credited M/s. F.L. Smidth & Co. in its books at the invoice price. On 7th April, 1950 Mr. J. Dalmia wrote to the then Minister for Industries of the Government of Orissa that machinery supplied to the Orissa Cement Ltd. should be revalued as according to the assessed it should be allowed a higher price than the invoice price due to the rise in the cost of cement plant at the time of supply from the time when it was originally ordered by the assessed. Mr. J. Dalmia in this letter also suggested that Mr. E.B. Mogensen who was Consulting Engineer to the Government of India may be asked to revalue the machinery being an expert in that line. On June 4, 1950 the Orissa Cement Ltd. passed a resolution in the following terms :
'RESOLVEDthat the question of settlement of the terms for taking over the machinery from M/s Dalmia Cement Ltd. was further considered. It was agreed to refer the matter to an arbitrator. The name of Mr. E.B. Mogensen, Consulting Engineer (Cement), Government of India was suggested in this connection. After receipt of advice from the arbitrator the matter would be further considered and decided. Dr. H.B. Mohanty was requested to take early steps to refer the matter to the arbitrator and get his advice quickly.'
(4) Mr. Mogensen did in fact revalue the machinery and came to the opinion that the machinery as supplied to Orissa Cement Ltd. was at the time of supply valued much more than the invoice price which had been debited to it and that the Orissa Cement Ltd. had benefited to the extent of almost Rs. 21 lacs. On this the Orissa Government looked into the matter and decided that it. would have no objection if some extra amount was paid by Orissa Cement Ltd. to the assessed for the machinery received by it. Thereupon by a resolution dated 4-12-1951 the Orissa Cement Ltd. allowed a further sum of Rs. 7 lacs to be paid to the assessed and in lieu of cash payment allotted 70,000 ordinary shares of Rs. 10 each fully paid up to the assessed.
(5) This amount of Rs. 7 lacs was taxed by the Income-tax Officer in the hands of the assessed as profits received from an adventure in the nature of trade. The assessed dissatisfied with the assessment appealed to the Appellate Assistant Commissioner but the appeal was disallowed. On further appeal to the Tribunal the assessment was upheld. Thereupon the assessed moved the Tribunal to state a case to the High Court under section 66(1) of the Indian Income-tax Act of 1922, which it had done and the following question has been referred:
'WHETHERon the facts and circumstances of the case the sum of Rs. 7 lakhs received from M/s Orissa Cement Limited was pursuant to an adventure in the nature of trade and as such taxable under the Indian'I.T. Act 1922.'
(6) The main question for determination is whether the facts as disclosed above would bring the sale or transfer of the machinery by the assessed to the Orissa Cement Ltd. within the meaning of the phrase 'an adventure or concern in the nature of trade.' Section 2(4) of the Indian Incometax Act, 1922, hereinafter called the Act, defines the term 'business' as including any trade, com merce, or manufacture or any adventure or concern in the nature of trade, commerce or manufacture. Section 10 of the said Act is the charging section and makes all profits or gains of any business as taxable. Thus profits or gains made by an assessed from his business or trade would be taxable as also any profits or gains made in an adventure or concern which though strictly may not be the business or trade of the assessed may yet be construed as being in the nature of trade or business qua him. If profits or gains are made in the regular trade or business carried on by an assessed there is no difficulty. It is only profits or gains made by him in something which is strictly not his business or trade that present some difficulty inasmuch as it has to be found out whether such profits or gains made can be construed as being analogous to or in the nature of trade or business or whether such profits or gains are to be regarded as windfalls, casual income or even accretion to capital or capital gain. There can be no doubt that when profits or gains are sought to be taxed as income arising from an adventure or concern in the nature of trade it is manifest that the particular income sought to be taxed has not accrued from or in the regular course of business and that only because of the definition of the terms 'business' such income would fall within the ambit of taxation. It has never been the case of the revenue at any stage that the assessed was ever carrying on the business of selling machinery and we may at the outset repell the argument sought to be raised by Mr. A.N. Kirpal, the learned counsel for the Revenue, that on a reading of the Articles of Association of the assessed the sale of machinery would be within the scope of its regular business. On the facts stated and according to the case set up by the Revenue before all the Tribunals this matter has to be decided keeping in view that this particular transaction in which the assessed received Rs. 7 lacs was deemed to be a transaction in the nature of trade or was to use the language of the statute an adventure or concern in the nature of trade. Mr. Gokhale, learned counsel for the assessed has urged that on the facts found by the Tribunal the only possible conclusion would be that the amount sought to be taxed in the hands of the assessed is either a casual receipt, as windfall or a capital gain but cannot be regarded as profit or gain from an adventure or a concern in the nature of trade. The learned counsel asserts that three basic facts have been found to be in favor though two facts are found against him. Referring to the decision of the Tribunal, Mr. Gokhale pointed out that after the remand report was received by the Tribunal it stood established first, that when the original order was placed for supply of machinery by the assessed in 1946 for using it in its own factory by installing it in Dandot in Pakistan; secondly, that the Dandot plant made available to the Orissa Cement Ltd. was originally supplied at the invoice price and no profit was made on the cost of the plant; and thirdly, that at the time of ordering the machinery there was no intention to make profit by subsequent sale. He conceded, however, that the Tribunal found two facts against him, namely, that after the partition of the country the assessed could have cancelled the order for plant to be installed at Dandot and that knowing that it could not instal the plant at Dandot it yet imported the machinery with the view to make profit. The learned counsel asserts that the two findings against him are not based on any evidence. The contention on behalf of the assessed, thereforee, it is that on the facts brought on record for various reasons it cannot be said that when the machinery was ordered there was any intention to indulge in trading activity or to sell the machinery at all later on for profit. The learned counsel submitted that the following circumstances would show that the transaction in question cannot be regarded as an adventure in trade :
(I)It was not part of the ordinary trading activity of the assessed to buy and sell cement plants or machinery and the transaction in question was an isolated transaction ; (ii) when the order was placed it was with the intention of acquiring an asset and if by any chance that capital asset after acquisition has been sold it would amount to a capital gain and not revenue receipt; (in) when the order was placed originally there was no intention to sell and purchase the plant with that intention or to the transactions of sale and purchase were two distinct transactions and not one transaction; (iv) the order placed on M/s F.L. Smidth & Co. was a cornposite order for supply of four plants at four places and if the assessed had cancelled the order for any one plant it may have led to failure of the whole contract or damages made the assessed liable in for breach of the contract in part; (v) the entire machinery as received was transferred to Orissa Cement Ltd. and the transfer was of the machinery or its parts as received and not after curing or maturing the same or putting them through some manufacturing process or the like nor were the different parts sold at different times; (v?) the machinery when it was received was supplied at the invoice price. The additional payment which was received later was on the ground of equity and by way of compensation without there being any obligation on Orissa Cement Ltd. to pay any higher price.
(7) From the various circumstances enumerated above Mr. Gokhale sought to draw the inference that the transaction in question was not one which could be regarded as an adventure an the nature of trade. He referred to us a number of decisions in which the various individual aspects enumerated by him were held to be not sufficient in regarding a particular venture to be a concern or adventure in the nature of trade. We shall presently deal with those cases but a few salient features in deciding a reference like the present one must first be set out.
(8) It is settled law that the jurisdiction conferred on the High Court by Section 66(1) of the Act is limited to entertaining references involving questions of law. If the point raised is one which only relates to the interpretation of a statute or the provisions of a statute, there is no doubt that it is a pure question of law and the High Court in such a reference is not bound by the views of the Tribunal but can itself construe the provision. Similarly, a construction of document of title would also be a pure question of law and if the Tribunal has put a certain construction on the terms of the document of title the High Court is free to adopt that construction or to disagree with it. There may then be cases where the point raised by the Tribunal or the assessed is a pure question of fact depending upon the evidence adduced. Consideration of such points is outside the scope of a reference under Section 66(1) of the Act and the decision of the Tribunal may be considered as final and conclusive. There, is, however, one exception to this rule and that is that if the conclusion of fact is based on no evidence or is based on an inference which no one can draw from certain primary evidentiary facts the correctness or validity of such an inference or finding can be subject matter of challenge in the High Court. The third class of cases may fall in the category where the assessed or the Tribunal may challenge a particular finding on the ground that it is a mixed question of law and fact. Such finding would no doubt be based on certain basic facts but the inference from those facts is to be deduced by applying well-settled legal principles. These inferences would be in the nature of legal consequences and the answer to the point raised would thus be a mixed question of law and facts. The primary facts found by the Tribunal in such cases would have to be accepted but the application of legal principles is open to challenge and examination. It is in this third category that the present reference falls. We are supported in coming to this conclusion by the observations of the Supreme Court in the case of Shree Meenakshi Mills v. Commissioner of Income-tax : 31ITR28(SC) , and reaffirmed by the Supreme Court in the cases of Oriental Investment Co. Ltd. v. Commissioner of Income-tax : 32ITR664(SC) and U. Venkataswami Naidu & Co. v. Commissioner of Income-tax 0065/1958 : 35ITR594(SC) .
(9) The second principle that has to be kept in mind is that 'it is all the surrounding circumstances in a given case which must be considered in coming to the conclusion whether a particular case falls within the mischief of the phrase an adventure in the nature of trade' and not any isolated point or factor. One individual aspect may or may not show that a given transaction was an adventure or a concern in the nature of trade. Similarly, the absence of a factor would also not be conclusive. An overall picture has to be borne in mind before coming to the conclusion one way or the other.
(10) Keeping to two aspects on which we have adverted above in mind we will now proceed to consider the various cases cited by Mr. Gokhale in support of the contention of the assessed. The first case to which our attention was invited is a decision of the Supreme Court in Saroj Kumar Mazumdar v. Commissioner of Income-tax, West Bengal : 37ITR242(SC) . In this case the assessed, who was engaged in various types of business activitiss and was a shareholder and Director or Managing Director of several companies apart from being a partner in a firm carrying on engineering work held shares of the value of Rs. 2,45,000, a .considerable portion of which belonged to members of his family. For the assessment years 1946-47 and 1947-48 he was assessed to income-tax on the sums of Rs. 53,000 and Rs. 59,000 but for the assessment year 1948-49 he submitted a loss return of Rs. 2,000.00. In order to acquire a plot of land for building a residential house for himself and constructing a workshop for his business activities the assessed had paid a sum of Rs. 32,748.00 to an Insurance Society in January, 1946 the amount bei
'ASalready indicated, 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. . . . . .'
(11) He further observed: 'Hence, though the single trasanction of purchase and sale may not have amounted to what is ordinarily understood by trade in the sense of a series of transaction, it was certainly a ventures in the nature of trade, because from the very beginning, the intention was manifest that the purchase was made not with a view to utilising the commodity for the personal use of the purchaser, but with a view to making profit by a re-sale, which was apparent from the very nature and magnitude of the commodity purchased......' At another place while considering some English cases the learned Judge observed as under :
'ITwas the assessed's sole dealing in whisky, but all the same it was held to be liable to income-tax on the ground that the nature of the transaction, with reference to the commodity dealt in in large quantities, which would not ordinarily be meant for personal or family consumption, may indicate that it was an adventure in the nature of trade.'
(12) Thus it is the totality of the facts brought out which have to be taken into account and not an isolated fact that a particular transaction was an isolated transaction or that there was no intention to sell when the assets was acquired.
(13) The next case to which our attention was invited was also a decision of the Supreme Court in Janki Ram Bahadar Ram v. Commissioner of Income-tax, Calcutta : 57ITR21(SC) . This was also a case of purchase of land with jute press and warehouses thereon which was re-sold at a profit. This decision also does not help the assessed inasmuch as Shah, J. speaking for the Court clearly brought out a distinction between transactions in respect of commercial commodities and land. Land is usually purchased by way of investment by persons ordinarily not in the real estate business. It was further pointed out that the manner of dealing with a commodity does not stamp the transaction as a trading venture and it was reaffirmed that the totality of the circumstances have to be considered in deciding whether a particular transaction is in the nature of trading venture. Reference was also made to yet another decision of the Supreme Court in Khan Bahadur Ahmed Alladin and Sons v. Commissioner of Incometax, Andhra Pradesh 1968 I.T.R. 573. This was also a venture in which large areas of land and building were purchased. Their Lordships of the Supreme Court had in this case found that the statement of case was unsatisfactory but yet from the facts as on record it was held that the transaction was in the nature of an adventure or trade and it was observed that the answer to the question whether a transaction is in the nature of trade must necessarily depend in each case on the total impression and effect of all the relevant factors and circumstances. The argument on behalf of the assessed was that the asset was acquired without there being any intention of re-sale at profit and it was an isolated trajisaction and further the assessed had done nothing to develop the land or parcel it out with a view to sell it to the purchaser and make profit. Although all these factors may have existed at the time of purchase yet the Court came to the conclusion that these factors alone would not tend to establish that the transaction was not an adventure in the nature of trade. This decision, thereforee, does not help the assessed at all.
(14) The fourth decision to which our attention was invited was the rule laid down by the Madras High Court in Ajax Products Ltd. v. Commissioner of Income-tax, Madras : 43ITR297(Mad) . In this case a company was formed for manufacture of abrasive and steel products. It acquired a silk mill which was worked for sometime and then sold at profit. The gain thus made was sought to be taxed by the Revenue on the ground that the purchase of silk mill was an adventure in the nature of trade. There was no material in this case to come to a finding that either when the assessed company started negotiations to purchase the silk mill or when it purchased the silk mill there was any intention of the company to sell the same at a profit later on. According to Mr. Gokhale this aspect is present in the present case also and in fact according to him there is a finding that there was no intention to sell the cement plant when it was originally ordered in 1946. So, he concludes that transaction in question must be held to be one not falling within the mischief of the phrase an adventure in the nature of trade. To our mind once again the ratio is not applicable and in fact as has been observed by the learned Judges of the Madras High Court on page 310 of the report: 'Thus the existence of an intention to sell at a profit even at the time of the purchase may be a relevant factor in deciding whether the transaction of purchase and sale constituted an adventure in the nature of trade. The existence of such an intention is neither conclusive nor decisive in proving that the purchase and the subsequent sale together constituted an adventure in the nature of trade, The proved absence of an intention to sell when a given property was purchased, and was subsequently sold, has however a much higher probative value in deciding the purchase and the subsequent sale together constituted an adventure in the nature of trade. If there was no intention to sell when the property was purchased, then the purchase and sale become independent transactions. Dissociation of the two transactions would be consistent only with the view that what was purchased was purchased as an investment. The purchase by itself could not constitute an adventure in the nature of trade. The sale by itself could not constitute an adventure in the nature of trade. The sale could only then mean the sale of property acquired and held as an investment.' As we will have occasion to observe hereafter on the facts and circumstances of the present case there cannot be dissociation of the two transactions of purchase and sale and the intention at the time of the placing of the order alone would not be material in deciding the point in issue.
(15) We were then referred to another decision of the Madras High Court in Janab Abubucker Salt v. Commissioner of Income-tax, Madras : 45ITR37(Mad) . In this case there was apurchase and re-sale of agricultural land. The onus on the revenue to prove that a particular transaction amounts to be an adventure in the nature of trade the facts did not disclose that the purchase in this case was not by way of an investment. As we have had occasion to observe earlier the ratio applying to the cases of purchase of land would not be on the same line as purchase of other articles. Furthermore the circumstances of each ease have to be looked into as the mere intention at the time of purchase or that a property purchased in the hope of being sold later on with a view to profit would not by themselves be a clear indication to determine the nature of the transactions.
(16) Mr. Gokhale also referred to a decision of the Bombay High Court in Bhogilal H. Patel v. Commissioner of Income-tax (Central) Bombay : 74ITR692(Bom) . This was also a case where the assessed who was an agriculturist businessman acquired two agricultural plots but later sold them at some profit and the gain thus made was sought to be taxed. The learned judges of the Bombay High Court on the circumstances of the case held the purchase to be an investment and dissociated the transaction of sale from the transaction of purchase on the ground that the particular transaction under scrutiny was not one which had been entered into at the time of purchase with the intention of earning a profit but was one where the purchase was made with the intention of investment. The rule laid down in this case would have no applicability in view of the facts and circumstances on which we will comment hereafter.
(17) Lastly, Mr. Gokhale relied on the well-known decision of the House of Lords in Leeming v. Jones 15 T R333. This was a case where the assessed as a member of a syndicate of four persons had acquired an option over a rubber estate with a view to re-sale at a profit. Another option of an adjoining estate was also acquired and the two estates were sold to a public company formed for the purpose of exploiting, the rubber estate. The syndicate's total receipts amounted to 3,000 and the balance remaining after deduction of certain expenses was sought to be taxed under Schedule 'D' of the English Income-tax Act. It was held that the transaction was not a concern in the nature of trade. The learned counsel strongly relied on the observations of Lord Buckmaster in support of his contentions. It is not necessary for us to comment upon the rule laid down in Leeming's case as the Supreme Court has considered the observations of Lord Buckmaster in its decision in G. Venkataswami Naidu & Co. v. Commissioner of Income-tax 0065/1958 : 35ITR594(SC) . Gajendragadkar,J. (as he than was) observed as follows :
'WEmay now refer to the decision of the House of Lords in Leeming v. Jones. In this case the appellant was a member of a syndicate of four persons formed to acquire an option over a rubber estate with a view to resell it at a profit. The option was secured but the estate was considered too small for a resale to a company for public floatation. An option over another adjoining estate was accordingly secured and it was decided to resell the two estates to a public company to be formed for the purpose. Another member of the syndicate undertook to arrnage for the promotion of this company. The syndicate's total receipts resulting from the transactions in respect of the estates amounted to 3,000 and the balance remaining, after deduction of certain expenses, was divided between the members. The appellant was assessed to income-tax, Schedule D, in respect of his share. The General Commissioners held that the appellant ac quired the property or interest in the property in question with the sole objection of turning it over again at a profit and that he at no time had any intention of holding it as an investment. That is why they confirmed the assessment. After the case was heard before the King's Bench Division it was remitted to the General Commissioners for a finding as to whether there was or was not a concern in the nature of trade. The Commissioners then found that the transaction in question was not a concern in the nature of trade and that there was no liability to assessment. It may be pointed out that in remitting the case for the reconsideration of the General Commissioners, Rowlatt, J., had observed that it was quite clear that what the Commissioners had got to find was whether there was a concern in the nature of trade and all that they had found was that tile property was acquired with the sole object of turning it over gain at a profit and without any intention of holding it as an investment. 'That describes', said Rowlatt, J., 'what a man does if he buys a picture that he sees going cheap at Christie's, because he knows that in a month he will sell it again at Christie's'. 'That', according to the learned judge, 'is not carrying on trade' and 'so what the Commissioners must do is to say, one way or the other, was this, I will not say carrying on a trade, but was it a speculation or an adventure in the nature of trade'. The learned judge no doubt added that he did not 'indicate which way the finding ought to be, but he commended the Commissioners to consider what took place in the nature of organising the speculation, maturing the property and disposing of the property, and when they have considered all that, to say whether they think it was an adventure in the nature of trade or not. It is thus clear that Rowlatt., J., indicated clearly though in cautious words what he thought was the true nature of the transaction made. Even so, on reconsideration of the matter the Commissioners returned a finding in favor of the assessed. After the finding was returned Rowlatt, J, held that he must abide by his own decision in Pearn v. Miller and so the appeal was allowed. The matter was then taken to the Court of Appeal where the revised finding of the Commissioners was treated as a finding on a question of fact not open to challenge and the point which was considered at length was whether even if the transaction was not an adventure in the nature of trade, could the profit resulting from it be taxed under Case Vi The Master of the Rolls, Lord Hanworth, traced the history of the dispute, mentioned how Mr. Justice Rowlatt had indicated to the Commissioners what they had to consider in determining the ques corporation remitted to them and observed that'. . . .Mr. Justice Rowlatt, and I think this Court, might perhaps have taken the course of saying that having regard to what he had called attention to in this case, the particular facts, of organising the speculation of maturing the property, and the diligence in discovering a second property to add to the first, and the disposing of the property, there ought to 'be and there must be a finding that it was an adventure in the nature of trade; but Mr. Justice Rowlatt withheld his hand from so doing and I think he was right, for however strongly one may feel as to the facts, the facts, are for the decisions of the Commissioners.' It would thus be clear that the decision of the Commissioners appeared both to Rowlatt, J. and the Court of Appeal to be erroneous. Even so, they refused to interfere with it on the ground that it was in regard to this approach that Lord Radoliffee, observed in the case of Edwards that 'it was a pity that such a tendency should persist to treat the findings of the Commissioners on the question as to the character of the transaction as conclusive.' In dealing with the question as to whether in Case I did not apply Case Vi could apply. Lord Justice Lawrence observed that 'in the case of an isolated transaction of purchase and resale of property there is really no middle course open. It is either an adventure in the nature of trade, or else it is simply a case of sale and resale of property.' The Court of Appeal held that if the transaction did not fall in Case I it was difficult to see how it could fall under Case VI. The discussion on this part of the case is, however, not relevant for our purpose. This decision of the Court of Appeal was taken before the House of Lords and the question debated before the House of Lords was about the application of Case Vi to the transaction. The House of Lords affirmed the view taken by the Court of Appeal and held that 'Case Vi was inapplicable because Case Vi necessarily refers 'to the word of Schedule D, that is to say, it must be a case of annual profits and gains and those words again are ruled by the first section of the Act which says that when an Act indicates that income tax shall be charged for any year at any rate the tax at that rate shall be charged in respect of the profits and gains according to the Schedules.' Lord Buckmaster agreed with the observations of Lord Justice Lawrence, that there can be no middle course open in such cases. Viscount Dunedin, in concurring with the opinion of Lord Buckmaster, dealt with the several arguments urged by the Crown but the observations made by him with regard to the last argument are relevant for our purpose. 'The last argument of the counsel for the Crown', observed Viscount Dunedin, 'was that there was a finding that the respondent never meant to hold the land bought as an investment. The fact that a man does not mean to hold an investment may be an item of evidence tending to show whether he is carrying on a trade or concern in the nature of trade in respect of his investment but per se it leads to no conclusion whatever.' According to Viscount Dunedin, recourse to Case Vi ignores the fact that it had been settled again and again that Case Vi does not suggest that anything that is a profit or gain falls to be taxed.'
(18) In the same decision the learned Judge dealing with the observations of Viscount Dunedin in the case of Commissioners of Inlands Revenue v. Reinhold 34 Tax Cases 389, observed that the initial declaration per se leads to the conclusion that the transaction was in the nature of trade or not but that by itself was not sufficient and much more was required to show the nature of the transaction. It was held that the decision in Leeming's case was given on the facts and circumstances of that case and it will be advantageous to quote the observations of the learned Judge in extenso inasmuch as Mr. Gokhale has placed great reliance on the decision in Leeming's case. The learned Judge had observed as under:-
'THIScase was no doubt a case on the border line; and if we may say so with respect it was perhaps nearer an adventure in the nature of trade than otherwise. It would not be unreasonable to suggest that, in this case, if the Commissioners had found that the transaction was an adventure in the nature of trade, the court would probably not have interfered with the said conclusion; but the Commissioners were equally divided and so assessment had been discharged by them. It was under these circumstances that the point about the onus of proof became a matter of substance; and, as we have already pointed out, all the learned judges have emphasised that the onus had not been discharged passed by the Commissioners. However that may be, it would, we think, be unsafe to treat this case as laying down any general proposition the application of which would assist the appellant before us....'
(19) In the present case, it cannot be denied that when the deal was negotiated for supply of four plants there was no intention of re-sale. In fact this intention was not there even when the orders were placed in February, 1946. The orders, however, were confirmed only on 6-8-1947 by the letter of that date issued by M/s. F. L. Smidth & Co. The machinery could not be imported in the country merely by placing of orders as import license had to be obtained before the contract of supply and purchase could be executed. These were admittedly obtained after the deal with the Orissa Government had gone through. It is also apparent from the record that the supply of the Dandot plant was kept in abeyance on account of the creation of Pakistan which came into existence soon after the confirmation of the orders made on 6-8-1947 by M/s F. L. Smidth & Co. No fact has been brought on' record to show that when the actual order to dispatch the plant was given there was still an intention on the part of the assessed to utilise the plant in question for one of its own cement factories or to purchase it as aninvestment. In fact it is clear that when the order was given to dispatch the plant it was with the intention to sell it to Orissa Cement Ltd. Mere debiting or crediting of the price would also not be relevant inasmuch as soon after the supply of the plant to Orissa Cement Ltd. Mr J. Dalmia by his letter dated 7-4-1950 raised the question of increase of price. Mr. Gokhale would like us to take into consideration the intention of the assessed only at the time of the placing of the order in 1946 but the intention to sell before placing of the dispatch order cannot be ignored. It is true that the machinery as received was given to Orissa Cement Ltd. But then the circumstances that Orissa Cement Ltd. was promoted by the assessed itself cannot be lost sight of nor the fact that the ex-officio directors nominated by the Government of Orissa were to remain neutral and not object to an increase in price according to the Government directive when the matter was to be considered by the Board of Directors of the Orissa Cement Ltd. Mr. Gokhale has strongly urged that it was an international contract and cancellation of one plant may have resulted in complications arising regarding supplies under the composite order for four plants. The situation for this did not arise and in fact it was in nobody's contemplation that such a situation would arise as to evident from the letter of M/s F. L. Smidth & Co. to the Income-tax Officer that the supply of the plant had been kept in abeyance and obviously was kept in abeyance because it was no longer required at Dandot in Pakistan. That the assessed company would have got Rs. 21 lacs extra for this plant but received only Rs. 7 lacs is also not a factor which would induce us to hold that Rs. 7 lacs was received by way of compensation or gratuitously. A concerted effort was made by the assessed to get extra price and it did succeed in that effort. The intention of the assessed to purchase the Dandot plant for the Orissa Cement Ltd i'> apparent from its letter of September 19, 1948 written to M/s F. L. Smidth & Co. where an indication was given that the plant meant for Dandot was provisionally earmarked for Orissa. The transaction to purchase cannot be kept as confined to the year 1946 and the whole series of events right up to the final order for diverting this plant to Orissa have to be taken note of. There is no doubt in our mind that by the time the dispatch order was placed the intention was to purchase it with an idea to resell. In any case the fact that it was a single and isolated transaction and not a series of transactions would not materially affect the case. A transaction, which is an adventure in the nature of trade is not one in the regular line of business of the assessed and normally it would not be one in a series of transaction; of recurring nature. Adventure in the nature of trade, as has been observed by us earlier, something strictly not part of regular business but something analogous to that. In the circumstances it would not be correct to lay much stress on the isolated nature of the transaction.
(20) Further, the intention at the time of the placing of the order would by itself not be a guiding factor inasmuch as the subsequent development in a case like the present one would have to be taken note of in coming to the conclusion as to when did the purchase really materialise and whether the same could be co-related to the sale.
(21) The purchase of the plant in question can also not be regarded as an investment or to be in the nature or an investment. From the very nature of the machinery purchased it is obvious that the plant was not and could not be acquired for the purpose of an investment like land or other immovable property and be retained indefinitely, even in the hope of selling it at some future date at a profit. The machinery of the plant could not be kept idle indefinitely, it had on the contrary to be put to use and worked soon after its import lest it should lose its utility either wholly or in part by becoming rusted or becoming out of date.
(22) Our answer, thereforee, to the question referred to us would be in the affirmative, against the assessed and in favor of the Revenue.
(23) In the circumstances there will be no order as to costs.