RAMACHANDRA IYER C.J. - The assessee belongs to the Nattukottai Chetty community. He was employed as an agent of the Chettinad Bank in Ceylon till 1942. During the course of the year he returned to India and established for himself a business in yarn and paper at Madurai. The assessees son-in-law was during all material times having a money-lending business at Colombo. In December, 1948, the assessee went for a short holiday to Ceylon for about 11 days. Admittedly, the assessee then had no idea of starting or doing any business or making an investment in that country. The Chettinad Bank was then closing down. Amongst its assets in that country was a coconut tope of an extent of 149 acres. The assessee got information that the bank was selling the property and bought it for a sum of Rs. 1,10,000. Having no monies of his own at that place, the assessee borrowed the amount necessary for the purchase of the property partly from his son-in-law and partly from certain others. He then employed a staff to work the estate and went on some occasions to that country with a view to supervise the same. He, however, made no attempts to pay off the doubts contracted for the purchase in any manner whatsoever. In the first year the property yielded an net income of about Rs. 16,485, a fairly high return for the price paid. Strangely enough, even that amount was not utilised to pay off the creditors. On November 1, 1950, the assessee sold the property to a resident of the place for a sum of Rs. 1,50,000. The debts contracted for the purchase of the property were then paid off out of the sale proceeds. The resultant profit to the assessee in the transaction was Rs. 36,230. This amount was brought to Indian Income-tax for the assessment year 1951-52 on the footing that it represented profits obtained by the assessee in the course of an adventure in the nature of trade, by the Income-tax Officer, Madurai, along with the assessees foreign income of Rs. 16,485 received by him in working the estate. The assessees contention that the purchase was made by way of investment only and that the profit of Rs. 36,230 could represent only a capital accretion did not find acceptance either with the Appellate Assistant Commissioner on appeal or with the Appellate Tribunal on further appeal. The Tribunal was directed under section 66(2) of the Act by this court to refer the following question for the opinion of the court :
'Whether, on the facts and in the circumstances of the case there was material to sustain the finding of the Appellate Tribunal, that the transaction resulting in an excess of Rs. 36,230 of the sale price over the purchase price was an adventure in the nature of trade ?'
There are certain broad features in the case, the cumulative effect of which in our opinion would afford material sufficient to sustain the view taken by the department as well as by the Appellate Tribunal viz., that the assessee embarked on an adventure in the nature of trade when he purchased the coconut tope in Ceylon. The assessee, apart from having been an ex-employee of the Chettinad Bank at Ceylon, had no other business connection with that country. That employment ceased in the year 1942 and, since then, he had no kind of interest in that country, either in regard to property or business. The assessees business is entirely in India where he resides and owns properties as well. It was while he went on a short holiday trip to Ceylon that the met the agent of the Chettinad Bank and learnt that they were selling the property in the course of their closing down. One can reasonably assume that, in the context in which property came to be sole, the price offered would be favorable to the purchaser. The assessee having no money of his own at Colombo had to borrow the requisite sum from various persons. Admittedly, there was no hope of bringing in moneys from India to pay off the creditors, as there were restrictions in that regard. Nor was there any attempt made to discharge the debts for nearly a period of two years. This is all the more strange when the assessee was in receipt of about Rs. 16,000 by way of income from the property itself. If he really intended to purchase as an investment, one would has an expected the assessee to pay off at least a portion of the liability out of the income. This omission on his part can only be explained on the footing that the expected to sell the property early and discharge the loans and that is what he did. It is rather significant that the assessee did not keep the property himself for any length of time, although it produced a very good return for the amount of price paid for it, he having sold it within two years of the purchase. It cannot be gainsaid that the circumstances under which the bank had to sell the property were propitious for a speculation in regard to its purchase and ultimate sale at a profit. The assessee must, therefore, have intended to purchase with a view to sell as a business venture.
Mr. Srinivasan, learned counsel appearing for the assessee, places the assessees case in two ways : (1) By contending that some of the features to which we have made a reference earlier are capable of a different interpretation and will not by themselves be sufficient to infer an intention on the part of the assessee to embark upon an adventure in the nature of trade, while he made the purchase. In addition there are certain other circumstances, which show that what the assessee intended at the time of the purchase was only to find an investment for his moneys at Ceylon. (2) That some of the reasons given by the department and the Tribunal for coming to the conclusion that there was such an adventure are demonstrably wrong.
Neither of the two contentions can be accepted as a correct approach to the question before us. In deciding whether a particular transaction is an adventure in the nature of trade or not, what one has to find is the intention with which the property was originally purchased; that can be gathered only on a consideration if the entire circumstances as a whole and not by taking each circumstance by itself and finding out whether that circumstance would be capable of a different interpretation altogether. Secondly, while the examination of the reasons given by the Tribunal and the department might be relevant for the purpose of ascertaining whether an inference as to the intention of the assessee could be to be legitimately drawn by them, the mere fact that some of the reasons given by them happen to be incorrect cannot be decisive of the question as to whether their conclusion is wrong. Indeed, what this court has got to consider in all such cases is whether there are sufficient materials on record to support the conclusion of the Tribunal. We shall, however, examine how far the contentions relied on by Mr. Srinivasan could be accepted. Learned counsel first contended that the purchase and sale of property in Ceylon, not being in the line of the business of the assessee, there could be no element of speculation or adventure in the nature of trade when he made the purchase. The question whether there was an adventure in the nature of trade or not is one of fact; it cannot be assumed as a proposition of law that the fact that a particular transaction was not in the line of the assessees business would make it any the less an adventure in the nature of a trade, if the intention for such and adventure on the part of the assessee had been otherwise proved. It must be realised that purchases and sales of property are not very unfamiliar to Nattukottai Chetty businessmen and that, after all, a speculative purchase and sale of one stray item of property does not require either very much skill or experience in that line.
It is then contended that it is unlikely that the assessee would have started such a speculation, having regard to the size of the property purchased and the fact that type ultimate profit made was comparatively small, judged in the light of the income from the property. The question whether a particular transaction is an adventure in the nature of a trade would depend, not on the extent of the property purchased, but on the capacity of the particular individual to speculate in regard to that property. As regards profit, the size of the profits actually obtained will hardly be a relevant circumstance in deciding the question; what is more relevant is the object with which the assessee purchased the property.
It was then argued that the assessee would have hardly speculated in the purchase of immoveable property at Ceylon towards the end of the year 1948, having regard to the fact that it was the most inopportune moment for an adventure of that kind. No evidence, however, had been placed before us to show that the time was inopportune. On the other hand, the time appears to have been very opportune in the sense that the owner of the property was anxious to sell away the property and close down it was business at Ceylon. Added to this, there is this admitted fact that the property itself was sold at a substantial profit.
It is then said that, as the assessee intended to go only for a short stay at Ceylon, there could not have been an intention to start an adventure of the kind ascribed to him. If the time was short for an adventure, it was equally short for making an investment. No conclusion can, therefore, be reached on the basis of that circumstances. Considerable reliance is placed on the fact that the assessee appointed servants for the purpose of the management of the property, employed staff and supervised it by himself by occasionally going over to Ceylon and realising substantial profits. These circumstances do not, however, militate against the transaction being an adventure. If a property is purchased with a view to sell it as a business proposition, it shows not mean that the owner should leave it derelict without properly managing it and appointing the necessary staff for the purpose. The fact that the property yielded a high income cannot always be a conclusive circumstance, which will negative the purchase being an adventure; it might even be the other way, for, if the property yielded such a high percentage of income, why should the assessee sell it way, unless it be that even at the time when he purchased the property, he had an idea of selling it. Mr. Srinivasan, therefore, was put to the necessity of exploring the reason why the assessee sold the property. He suggested two reasons as to why, according to him, the assessee was practically compelled to sell the property which was yielding a very good return for the amount laid out on it. The first was legislation in Ceylon, which envisaged the taking over of these properties for providing houses for a class of Ceylonese citizens. The Tribunal has set out the relevant provisions so section 42 of the Land Acquisition Act of 1950. That Act clearly states that if a property is taken over for proposes envisaged in the Act, the assessee will obtain the market price. If the assessee was going to obtain the market price, there was no reason for him to get panicky and sell the property to the purchaser. And, if really legislation prevented him from enjoying the property, there was no reason why the assessee would get a purchaser at Rs. 1,50,000 for the same property. It was then suggested that there were disputes between the assessee to hold on to the property, if he intended it as an investment. A document, annexures 'A', is filed to evidence the claim of the brother. But that is merely a caveat calling upon the assessee to give information of any registered document that the might execute in Ceylon. It is true that the onus of proving that a particular transaction is an adventure in the nature of trade and that the profit obtained by the assessee was assessable to tax is on the department; but, as we stated above, there are several circumstances in the case, which will justify the conclusion arrived at by the Tribunal.
Mr. Srinivasan then contended that the department as well as the Tribunal went wrong in a few of the reasons given by them. For example, he submitted that the Income-tax Officer was in error when he stated that it was the habit of Nattukottai Chettiars to buy property when they go cheap and sell them at a high price and thereby make a profit. There is, no doubt, some force in the contention that this reason is not a valid one, though it might be that Nattukottai Chettiars have an aptitude for business. But that is not the only reason given by the Income-tax Officer. Indeed, we are concerned in this case, not so much as to how the Income-tax Officer disposed of the matter, but whether the reasons given by the final court of fact, viz., the Appellate Tribunal, are correct or not. The Appellate Assistant Commissioner has given a number of reasons for coming to the conclusion that the transaction was an adventure. But one of the reasons given was that the purchase by the assessee was prompted by an antecedent knowledge of the village expansion schemed of the Government and it was made with a view to secure a higher price. This was in a way accepted by the Tribunal, which proceeds to give other reasons as well :
'The period chosen for the purchase, as indicated above, was highly speculates. There was also a move on the part of the Government to acquire this property for the purpose of distribution among the landless Ceylonese, which he must have known about. It is common knowledge that acquisitions by Government are almost always pecuniarily advantageous to the owners.'
At the time when this court directed a reference under section 66(2), it required the Tribunal to examine the provisions of the relevant statutes and other materials for showing that acquisitions by Government were almost always pecuniarily advantageous to the owners and on the question of the knowledge of the assessee in regard to the then impending legislation. But, beyond producing the enactment, nothing was placed before the Tribunal to show that the assessee would obtain a higher value, if the lands were to be taken by the Government. The reason cannot therefore be accepted as valid. But, whatever that may be, there are other materials in the present case to support the conclusion arrived at by the Tribunal that when the assessee purchased the property in Ceylon in December, 1948, he did so by way of an adventure in the nature of a trade. The profit of the transaction has therefore been rightly brought to tax.
We answer the question referred to us in the affirmative and against the assessee, who will pay the costs of the department.
Advocates fee Rs. 250.
Question answered in the affirmative.