1. The question on which our opinion is to be expressed is 'whether the assessment of excess realisation of S 8,200 on the sale of house property No. 166 Kotha Road, Taiping as revenue profit (receipt) is valid in law'. The matter relates to the assessment year 1958-59, the accounting period having ended on May 31, 1957. The assessee was the karta of a joint Hindu Family consisting of himself and his two sons Palaniappa and Chidambaram. The family was doing business in money lending and dealing also in property under the vilasam 'S. T. S.' at Taiping in Malaya. On June 1, 1951, there was a partition of the family assets at which the assessee was allotted some house properties, one inam, deposits with Chettiar firms bank and cash balances in the Taiping business. On June 8, 1951, the assessee opened his own book of account, with the assets and liabilities which has formed the business assets of the erstwhile family. It appears that from 1951, the assessee no longer acquired any property. In 1952, he stopped money-lending and the last realisation of the outstanding was on May 31, 1956. On November 23, 1956, he sole the said property and realised $ 8,200, in excess over the purchase price. The assessee claimed that this excess realisation was a capital accretion not chargeable to tax. The Income-tax Officer being of the view that the assessee should be treated as a dealer in properties during the accounting year, held that excess realisation was a revenue receipt. In forming that view, he purported to follow an earlier order of the Appellate Assistant Commissioner in respect of this very assessee relating to previous years.
On appeal, the Appellate Assistant Commissioner of Income-tax considered that the property that was sole in November 1956, like the other properties allotted to his share at the partition, constituted the stock-in-trade in his money-lending business and the profits made by sale of the property were, therefore, assessable to tax. He found that the assessee continued the money-lending business by making further advances in 1951-52 thereby treating the properties allotted to his share were never segregated or separated from the money-lending accounts and the income from the properties and the money-lending business were always merged. On his view of the facts just mentioned he posed for himself the question whether by the suspension or cessation of further advances of loans or by the final recovery of all money-lending outstanding, the properties ceased to be the stock-in-trade and became capital assets in the hands of the appellant. His opinion was that it was not so.
There was a further appeal by the assessee to the Tribunal, which substantially agreed with the Appellate Assistant Commissioner. The Tribunal found that the assessee was a dealer in properties and the property sold in 1956 formed part of his stick-in-trade. The facts on which it reached that conclusion are these. The erstwhile family was a dealer in properties and its stock-in-trade was partitioned among the three coparceners, the assessee and his two sons. It may be that there had been no further purchase by the assessee. But he had opened up his own books of account and continued to deal with all the assets taken over in the same manner as before. In these books, the assessee has dealt with the sales of some of these properties from assessment year 1953-54 on the footing that they constituted only his stock-in-trade and has duly transferred the profit or loss therefrom to his Adayam account from time to time. The property presently in question has not also been shown to be any different from the rest of the properties taken over at the time of partition. The fact that the assessee took the property in a partition would make no difference as it was only part of the stock-in-trade of the family divided. The Tribunal therefore confirmed the assessment.
(2) Before us, Mr. K. Srinivasan for the assessee, contends that whatever was obtained by the assessee at the family partition was a capital asset in his hand, solely belonging to him and constituted his personal individual property, that since there was no purchase made by the assessee after petition, he could in no sense be said to have carried on business in property or as having constituted the properties that fell to his share at the partition, as stock-in-trade in his money-lending business, which he ceased to carry on after 1952, at any rate when on May 31, 1956, he had made the last realisation of the outstandings in the money-lending business, and that lastly, unless something was done to the properties which had been allotted to his share at the partition which would clearly invest them with the character sought to be imputed to them by the department, they should be deemed to continue to have the same character as they bore at the partition. Learned counsel urges there is no evidence on record to justify a finding that the property here in question ever formed part of the stock-in-trade of the assessee's money-lending business or business in property. On the other hand, learned counsel for the revenue urges that the question whether the appellant was carrying on business in property or money-lending and whether the property was the stock-in-trade is one of fact and that if the factual conclusion in regard to that matter drawn from proved facts appear reasonable and possible, this court should not interfere with the Tribunal's findings. On that basis, he says that the facts found by the Tribunal did justify its conclusion.
(3) It is not contended for the revenue that at partition the allotment of properties and other assets to the share of the assessee continued to have the same character only by reason of the fact that the erstwhile joint family had been carrying on business in money-lending and that the properties could in any sense be regarded as stock-in-trade of the assessee at that stage. In fact, in our view, such a contention would not be open to him. For, without more facts, the allotment towards the share of the assessee will be capital in his hands. The contention of the department is that it has been converted into a stock-in-trade of a going business. It is entirely for the revenue to establish that fact on the basis of clear evidence. Now, what are the facts here? The assessee would undoubtedly appear to have brought the real properties allotted to his share at the partition into the same account in which his dealings in money-lending had been entered. In 1952 there was no money-lending actually carried on by the assessee. At any rate, nothing has been said to the contrary by any of the authorities below. On May 31, 1956, the assessee had realised the last of the outstandings. It was after that date the sale in question took place.
Can it be said, on these facts, that the assessee was carrying on the money-lending business into which he had thrown the property in question as the stock-in-trade of that business or that, by reason of the sale of the properties that had been allotted to his share, he was carrying on a business in property? It is not in dispute that after partition the assessee did not purchase a single item of immovable property. It is true the Appellate Assistant Commissioner suggested in his order that the properties were never segregated or separated from the money-lending accounts and the income from the properties and the money-lending business were always merged. We are unable to appreciate the import of this observation, wherefrom he concluded that merely because the assessee continued the money-lending business by making further advances in 1951-52, therefore, it ipso factor followed that he treated the properties also as stock-in-trade. If this assumption on the part of the Appellate Assistant Commissioner cannot be sustained, his further observation that the properties were never segregated or separated from the money-lending accounts will also have no significance. In fact while the Income-tax Officer was of the view that the assessee should be treated as a dealer in property, a view which the Tribunal accepted, the Appellate Assistance Commissioner does not appear to have gone that far, but was only prepared to hold that the properties must be deemed to have continued as stock-in-trade in the money-lending business.
One fact which has been stressed for the revenue and which has been relied on by the Tribunal is that the assessee himself had dealt with sales of some of these properties from the assessment year 1953-54 on the footing that they constituted only his stock-in-trade and had duly transferred the profit or loss therefrom to his Adayam account from time to time. We are of the view that this conduct, as it is described at the Bar, can hardly support the view that on that account he can be said to have carried on business as a dealer in property or because he was making realisation of the outstandings, he was carrying on a business in money-lending in which the stock-in-trade included the property in question. In our opinion, the facts disclosed in the order of the Tribunal as well as in the statement of the case do not support the Tribunal's finding that the assessee was a dealer in properties in the accounting year.
(4) In taking that view, we think considerable assistance is derived from Kannappa Chettiar v. Commissioner of Income Tax : 46ITR576(Mad) and Murugappa Chettiar v. Commissioner of Income Tax : 46ITR797(Mad) . The facts of these two cases present almost a parallel. In the first of these cases, there was, as here, a partition of a Hindu undivided family which had carried on business in buying and selling properties and money-lending, and at that partition, the family business was allotted to a member as a going concern, but the members discontinued the business of buying and selling of properties and continued only the money-lending business, and subsequently sold one of the properties which had been purchased by the family for sale. The question was whether on the facts and circumstances in that case, there was material for the finding of the Tribunal that the sum of 6,136 dollars constituted income assessable to tax. This court answered the question in favour of the assessee and observed:
'But the point which arises for consideration in the present case is not so much as to what the character of the property was in the hands of the undivided Hindu family but what its character was in the hands of the assessee after partition. The stock-in-trade of the business relating to purchase and sale of properties did not, on the closure of such business, become automatically the stock-in-trade of the money-lending business. It would certainly be open to the department to show that by conduct or otherwise the assessee had treated even those properties as part of the stock-in-trade of the money-lending business; but this has not been done in the present case....The mere circumstance that the income from the properties was entered in the account books of the money-lending business and even included for the purposes of assessment cannot mean that the properties were treated as stock-in-trade of such business.'
(5) That is precisely the case in the instant case. In the other case decided by this court also, the decision was much similar. There, on a partition of a Hindu undivided family the assessee, a sub-family, received some items of property. The items of property allotted to the assessee had been acquired by the family in the course of its money-lending business and in the hands of that family had formed part of the stock-in-trade of the business. The assessee sold some of these items of properties and some other properties which it had acquired in the course of its money-lending business which it has started after the partition. The Income-tax Officer brought to tax the profits arising on the sale of the properties treating all the properties treating all the properties on the same footing, i e., as stock-in-trade of the assessee's money-lending business. This Court held that there was no material to show that the money-lending business of the assessee formed part of the earlier business of the assessee or that the properties has been treated as the stock-in-trade of the assessee's business. What is even more important in that case to note is that this Court considered that the circumstance the income from the properties had been utilised in money-lending business, could not convert the capital from which it arose, into stock-in-trade of the money-lending business itself. The principle of these two decisions, we think, applies to the facts before us. We may also notice a recent judgment of this Court, to which one of us was a party, in Alagappa Chettiar Commissioner of Income-tax : 59ITR440(Mad) . In this case, too, the facts were more or less similar except that this Court there was concerned, instead of a joint family and division of its assets, with the dissolution of a firm. The conclusion we have arrived at, on the facts of this case, is also supported by the approach made in : 59ITR440(Mad) .
(6) For the revenue it has been strenuously urged that in matters of this kind where this Court is dealing with the reasonableness or property of factual conclusions arrived at by the Tribunal, precedents in the form of earlier cases decided by this Court will not be of pressing value, as such cases have been decided in the light of particular and peculiar facts and circumstances. Learned counsel for the revenue has reminded us of the limited jurisdiction of this Court under Section 66(2) of the Income-tax Act, 1922, and says that if there are two views possible on the factual inference to be drawn from primary facts established on material, and the Tribunal has chosen to accept one of the two views, this Court should hardly interfere with it. Learned counsel has further submitted that where a mixed question of law and fact of the soundness of the factual inference from proved facts is canvassed, this Court's jurisdiction is limited to find out whether the view taken by the Tribunal is reasonable and if this Court finds it reasonable, it should not proceed beyond and try to substitute its own view of the inference to be drawn from proved facts.
(7) We do not think it necessary in this case to touch in any detail on the scope and nature of our jurisdiction under Section 66. Broadly speaking, a pure question of law and a pure question of fact present no difficulty. But in between may lie a variety of situations and approaches which may present infinite problems of varying degree and nicety. Where what is stated to be a question of law is something which has sloped down to a margin which boarders on fact, naturally the question arises whether it is, in fact, a question in respect of which this Court can express an opinion under Section 66.
(8) The Supreme Court in G. Venkataswami Naidu and Co. v. Commissioner of Income-tax : 35ITR594(SC) , while dealing with the jurisdiction conferred on the High Court by Section 66(1) observed:
'In some cases, the point sought to be raised on reference may turn out to be a pure question of fact; and if that be so the finding of fact recorded by the Tribunal must be regarded as conclusive in proceedings under Section 66(1). If, however, such a finding of fact is based on an inference drawn from primary evidentiary facts proved in the cases, its correctness or validity is open to challenge in reference proceedings within narrow limits. The assessee or the revenue can contend that the inference has been drawn on considering inadmissible evidence or after excluding admissible and relevant evidence; and, if the High Court is satisfied that the inference is the result of improper admission or exclusion of evidence, it would be justified in examining the correctness of the conclusion. It may also be open to the party to challenge a conclusion of fact drawn by the Tribunal on the ground that it is not supported by any legal evidence; or that the impugned conclusion drawn from the relevant facts is not rationally possible; and if such a plea is established, the Court may consider whether the conclusion in question is not perverse and should not, therefore, be set aside. It is within these narrow limits that the conclusions of fact recorded by the Tribunal can be challenged under section 66(1).'
(9) These observations were reiterated and applied in Saroj Kumar Mazumdar v. Commissioner of Income-tax, West Bengal : 37ITR242(SC) . The view is slightly differently stated by the English Courts as to how what appears prima facie to be a finding of facts is to be dealt with under a reference for opinion. In Edwards (H. M. Inspector of Taxes) v. Bairstow and Harrison, (1956) 36 Tax Cas 207, Lord Simonds laid down the test:
'For it is universally conceded that, through it is a pure finding of fact, it may be set aside on grounds which have been stated in various ways but are, I think, fairly summarised by saying that the court should take that course if it appears that the Commissioner have acted without any evidence or upon a view of the facts which could not reasonably be entertained.'
Lord Radcliffe put the test somewhat differently:
'But, without any such misconception appearing ex facie, it may be that the facts found are such that no person acting judicially and properly instructed as to the relevant law could have come to the determination under appeal. In those circumstances, too, the court must intervene. It has no option but to assume that there has been responsible for the determination. So there too, there has been error in point of law.'
(10) Instructive as these observations of the noble Lords are, eventually the question whether a factual finding is open to examination by this court, while acting under section 66, will depend upon the facts and circumstances in each case and the view this court may take of them. We think that learned counsel for the revenue is right when he contends that, if the overall impression of this court on an appreciation of the proved facts and the inference drawn therefrom by the Tribunal is that its conclusion is reasonably possible, this court would be reluctant to interfere, but the facts and circumstances in the instant case do not fall within the rule. We are clearly of opinion that there is nothing in the order of the Tribunal or the statement of the case or even the record before us to justify the conclusion that the assessee was a dealer in properties or that because the properties allotted to the share of the assessee were entered in his account books subsequent to the partition, and the income from some of the properties so allotted was utilised for money-lending business in the first year after partition, the properties were treated as stock-in-trade in the money-lending business.
(11) The question referred to us in answered in favour of the assessee and against the revenue with costs. Counsel's fee Rs. 250/-.
(12) Reference answered.