Walter Salis Schwabe, K.C., C.J.
1. The assessee is a Nattukottai Chetty carrying on business in Madras and elsewhere as banker and money-lender. In the year of assessment, he remitted from Madras sums aggregating over 4 lakhs of rupees to Penang, such sums being invested there in Straits Settlements dollars, and ultimately reconverted into rupees and remitted back to Madras. The remittances were made on eight occasions within a period of four months in 1919 and the retransfer to Madras was on thirteen occasions covering a period of four months from the end of 1920 to the beginning of 1921. Owing to the fluctuations in exchange, which varied between 83 and 175 rupees per 100 dollars, the assessee made a profit of a considerable amount on the transactions. He has been assessed to income tax on that profit, and the question referred to this Court is whether he has been correctly assessed. Under Section 51(1) of the Income Tax Act which was then to force, any question which has arisen with reference to the interpretation of any of the provisions of this Act may be referred to the High Court. This action probably gives wider powers than Section 66 of the Indian Income Tax Act of 1922, the consolidating Act now in force, which limits the references to the High Court to questions of law. It is not, however, necessary to consider the exact meaning of the words of these sections because, the facts having been found, the question whether or not they bring the income within the reach of any particular section of the Act is a question of law.
2. Section 3 of the Act applies to all income from whatever source it is derived, if it accrues, or arises, or is received in British India. Certain exceptions are set forth in Section 3(2) and among those exceptions is to be found (VIII) 'any receipts not being receipts arising from business or the exercise of a profession, vocation, or occupation which are of a casual and non-recurring nature.' By the combined effect of Sections 5 and 9 income derived from business is chargeable to income tax in respect of the profits of any business carried on by the assessee. In the United Kingdom, income-tax is payable on the balance of profits or gains derived from carrying on a trade or business. I can find no distinction in this matter between the laws of the two countries. The English Acts have not got the exception in so many terms of receipts of a casual and non-recurring nature; but, as, by the words of Section 3(2)VIII of the Indian Act, receipts of a casual and non-recurring nature are only exempted when they are not receipts arising from business, the question to be considered both in India and England is whether a particular receipt is properly brought into account or omitted in arriving at the profits of a business. If the transactions are business transactions and result in a profit or loss made in the carrying on of the business, they must be brought into account; otherwise not. The questions which have arisen for decision have been whether particular transactions form part of a business carried on by the assessee. They need not be part of some already established business but they must together form a business. If the transactions form part of the original business of the assessee the profits or losses on them must, of course, be brought into account. But where the transactions are outside the scope of the ordinary business of the assessee it is often a difficult question to decide whether or not they are to be treated subject to income-tax. Profits may be made by the realisations of security or by the sale of land or moveable property and, in the case of one man they may be merely successful realisations of assets or alterations of investments while in the case of another man they may form part of the income of a business. To give a simple illustration a Barrister might buy a picture and at a later date when the works of the particular artist were in demand, sell that picture and realise a profit. No income-tax would be payable on this profit. If a picture dealer bought a picture and on the same events happening sold it at a profit, that profit would be a profit earned in his business and would be liable to income-tax. So too, profits made on an isolated speculation are not liable to income-tax but those made in speculation of a similar kind as a part of business would be liable. A difficult question may, however, arise as to whether the transactions are of such frequency as to amount to carrying on a business. The distinction is well illustrated by the cases of California Copper Syndicate Co. Ltd., v. Harris 5 Tax Case 159 and Hudson's Bay Co. v. Stevens 5 Tax Case 424. In the former a company was formed for the purpose of acquiring and reselling mining property and also for working such property. It acquired and worked various properties and then resold the whole at a profit, and it was held that such profit was liable to income tax and Lord Justice Clark Macdonald in the course of his judgments subsequently approved by the Privy Council in Commissioners of Taxes v. Melbourne Trust Co. 1914 A.C. 1001 said 'The question to be determined being is the sum of gain that has been made a mere enhancement of value by realising a security or is it a gain made in an operation of business in carrying out a scheme for profit making.' In the latter, a company received by grant from the Crown and as consideration for surrender of their Charter large tracts of land and then proceeded over a period of time to sell that land in small lots and it was held that the profits made on these sales were not liable to income-tax, the sales being merely realisations of assets, the company not carrying on a trade in buying and selling land. In Beynon Co. Ltd., v. Ogg 7 Tax Case125, a company whose ordinary business was that of coal merchants, Insurance Brokers and Agents of colliery companies purchased on its own account as a speculation 250 Railway Coal Trucks and subsequently got rid of them at a profit. It was held that the profit was made in the operation of the company's business. It was pointed out by Sankey, J., that though in most cases an isolated transaction does not fall to be chargeable, it was not possible to say that the mere fact that it was an isolated transaction at once takes it out of the category of chargeable property and it was necessary to look at the number of waggons bought, the amount invested and how they were sold, and, in fact, to look at the whole circumstances to say whether the assessee had embarked on the purchase of Railway Waggons as part of his business.
3. Turning to the facts of this case, the assessee was a dealer in money and had by reason of his dealings with the Straits Settlements facilities at hand for dealings in exchange between Madras and the Straits Settlements. He had at Penang agents, themselves bankers who were in the habit of collecting for him outstandings in his money-lending business, and as and when required remitting them to India and in the process converting dollars into rupees. During the period in question in this case, he got regular information by letter and cable from these agents as to the movements of exchange in the Straits Settlements. He sent large sums of money extending over a period of four months. At first the market went against him and he sent increasing quantities of rupees, no doubt, with a view to averaging the cost of the dollars. The dollars were by arrangement with the agents left on deposit carrying interest, a fact not in itself conclusive and when he got them back, by reason of the increase in the value of the rupee he was able to realise by degrees an increasing profit. Taking all these facts into consideration, I think that the right inference to be drawn is that in this case those dealings in exchange had become part of the assessee's banking business, and I think it too that even looked at apart from his ordinary business, he did not enter into these transactions as an isolated investment or capital or speculation but as a business of a dealer in exchange.
4. On these grounds, I hold that the decision of the Commissioner is correct. The assessee must pay the costs of this reference.
Coutts Trotter, J.
5. I agree.