VEERASWAMI J. - This reference relates to the assessment year 1952-53 and the questions we are called upon to answer section 66 (1) of the Income-tax Act of 1922 are the following :
'1. Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that the income of the applicants wife from her money-lending business is properly includible in the applicants assessments ?
2. Whether, on the facts and in the circumstances of the case, the finding of the Tribunal that the income from agricultural lands is only business income is correct ?
3. Whether, on the facts and in the circumstances of the case, the Tribunal had material to hold that the profit on sale of Kandal and Bishopdown properties were liable to tax both as a dealer and as an adventurer ?'
The assessee is the same as in Tax Case No. 61 of 1962. The first two questions in this reference are covered by our answers in the other tax case. Following our judgment in that case, we answer the first question against the assessee and the second question in favour of the assessee.
The third question relates to the inclusion in the chargeable income of a total sum of Rs. 5,853 representing the difference between the purchase and sale prices of two houses call Kandal House and Bishopdown House at Ootacamund. It is not clear when the two house were parched, though we are told that it was in 1958. Kandal house was sold in two parts, the first part prior to the assessment year in question and the second, during the assessment year for a sum of Rs. 3,000, the original purchase price being Rs. 2,000. The Bishopdown house was purchased for a sum of Rs. 2,346 and was during the assessment year for Rs. 6,500. The Income-tax Officer being of opinion that the purchase of the houses was wholly with a view to dispose of them at an opportune moment and that the assessee purchased the houses an ancillary activity to the primary business activity of money-lending brought the total amount to tax as income from business. The Appellate Assistant Commissioner, without discussing the matter as to whether in his view the purchase and sale of the houses realised on these properties was also liable to tax. In the statement of the case submitted by the Tribunal, it went a step further and said that the assessee was a habitual dealer in properties and that therefore the profits realised on those properties was also liable to tax.
Now the question us is whether there was material before the revenue or the Tribunal to hold that the purchase and sale of the two house was in the course of a trade plied by the assessee or an adventure on his part in the nature of trade. On that question, as it appears to us, the Tribunal has not applied in its mind properly. The question before the Tribunal was not whether the assessee was habitually buying and selling properties. As Rowlatt J. on served was habitually buying and selling properties. As Rowlatt J. observed in Graham v. Green, tax is levied not on a habit. Habit by itself does not constitute a trade or an adventure in the nature of trade. What the Tribunal should have found, with reference to the materials, if any, before it, was whether the two sales could be regarded as in the course of trade or an adventure in the nature of trade. In the statement of the case, as we mentioned, no doubt the Tribunal said that the assessee was a habitual dealer in properties. It seems to us that this statement in the case is not supported by any material as the record before us in the reference goes. In the absence of a finding by the Tribunal that the purchase and sale of the houses was in the course of a trade in property or constituted an adventure in the nature of trade, no tax liability would attach to the sum of Rs. 5,853.
We answer the third question in favour of the assessee with costs. Counsels fee Rs. 250.