SRINIVASAN J. - The question referred for the determination of this court i :
'Whether, on the facts and in the circumstances of the case, the sum of Rs. 17,144 could be taxed as income arising out of an adventure in the nature of trade in the hands of the assessee?'
The assessee is the widow of one Arumugham Chettiar. She lost her husband when she was a minor. The family consisted of the widow, the mother and sister of the deceased. Her husband was himself an adopted son and the family was involved in litigation and several decrees were being executed against the family properties. In those execution proceedings, the assessee figured as the judgment debtor. One of the properties brought to sale was the family residential house. The assessee, in order to save at least that property from sold away, had that property purchased in the name of one Vaduganathan Chettiar. This person was prevailed upon to take steps through the intervention of the assessees father, one Kuppan Chettiar. Vaduganathan Chettiar, accordingly, purchased the decrees against the estate, and in execution of one of such decrees, he himself purchased the residential house in court-auction. It is not denied at this stage of the proceedings that Vaduganatha was only a benamidar for the assessee. The purchase was for Rs. 33,000 or so. Subsequently, this property was sold to the assessees sister-in-law for about Rs. 50,000 so that a surplus of Rs. 17,144 was realised for the benefit of the widow by this transaction, It is this profit that is sought to be brought to tax in the hands of the widow as profit arising out of an adventure in the nature of trade.
In the orders of the Income-tax Officer, it is state :
'In the course of the assessment of Sri AR. VD. Vaduganathan Chettiar of Paganeri (F. 1910) it is found that certain decrees against the estate of the assessees deceased husband were purchased by him and realised, resulting in a profit of Rs. 17,144. It was alleged by him that the transactions were done on behalf of the assessee and that he acted as only a benamidar. The contention was not, however, accepted and he has been assessed on the income. An appeal has been preferred by him against the same which is pending. Lest it should escape assessment in the assessees hands, if it is ultimately held by the appellate authorities that he was only benamidar for the assessee, this assessment is made without prejudice to the position taken that the profit relates to Sri AR. VD. Vaduganathan Chettiar.
The assessee contends that the profit itself is not assessable. But, on the facts and circumstances of the transactions, there has been a venture to make profit. The fact that the assessee is the widow of late Arumugham Chettiar is no bar to a venture of this kind, as, in Chetty custom, ladies have their personal interests which are recognised to be quite distinct from other interests in the estates of their husbands.'
The Income-tax Officer, accordingly, brought this amount to tax.
In the appeal, the Appellate Assistant Commissioner, after setting out the facts, observe :
'Her, only stand is that the surplus of Rs. 17,144 received by her represents capital accretion as the purchase of the decree and the house were not made with a view to profit by resale. They were made with the bona fide object of getting possession of her husbands property. The house had to be sold to her sister-in-law as she refused to give possession to the appellant.'
Dealing with this contention, the Appellate Assistant Commissioner thought that the motive behind the transaction in question was undoubtedly to gain something for the benefit of the appellant. Without any further discussion of the question, he agreed with the Income-tax Officer that the transaction in question represented a venture in the nature of trade.
The further appeal to the Tribunal also failed. The Tribunal accepted the argument of the department that, if there was no profit-making motive in the transaction, 'there was no question of the assessee getting help from the said Vaduganathan Chettiar' and, further, that the resale of the property would have been foremost in the mind of the assessee 'even before the assessee resolved to enter into this gamble'; the Tribunal thought that, in view of the strained relationship between the assessee and her sister-in-law and mother-in-law, the assessee could have had no expectation of getting peaceful possession of the property, and that, even when she purchased the property, she must have had the idea of selling it at a profit. On this reasoning, the Tribunal confirmed the assessment.
It seems to us that the officers of the department and the Tribunal as well ignored all the material considerations which are necessary to be examined before a transaction can be held to be an adventure in the nature of trade. The case is no different that from that of a judgment debtor whose properties are being brought to sale in execution of a decree against him. It is notorious that properties to not fetch an adequate price in court auction. Assuming that the judgment debtor arranges person for the benami purchase of the properties and has the property subsequently sold by private treaty at a higher price, does that amount to an adventure in the nature of a trade? The position of the present assessee is precisely that and nothing more. Even conceding that she wanted to realise as much as she could out of the property, property in which she had an interest, how does it make the transaction an adventure in the nature of trade? She was herself one of the judgment debtors. It should also not be forgotten that the property in the present case was the family residential house, and no motive of 'trading' can possibly be attributed to a judgment debtor who seeks to save that item of family property for herself. In this set-up, in order to obtain either the possession of the property for herself or even to obtain a better price for the property than it would fetch in court auction, the assessee, judgment debtor, out forward a benamidar to purchase the property and, subsequently, sold it a third party at a higher price; we are unable to see what indicia of an adventure in the nature of trade exist in the case. Had it been the case of a third party altogether, who purchases properties in court auctions and, subsequently, sells them at profit, one can visualise that the motive that operated upon the mind or such a person was to indulge in transactions that would result in a profit, and even a solitary transaction of that kind may lead to the inference that it was in adventure in the nature of a trade. But, where a person entitled to the property seeks to obtain a better price for the property in circumstances such as set out earlier, it is impossible to imagine how any attributed of trading venture can be said to exist in such a case. The Tribunal ignored these aspects of the matter. To merely characterise the transaction as a 'gamble' does not take the matter further. Even if the assessee all along intended to resell the property, what she was doing was only to get as high a price as she could for her own property which was a capital asset in her hands. It is quite conceivable that, but for the obstruction caused to her obtaining possession of the porperty in the delivery proceedings, it is not unlikely that the assessee would not have sold the property at all.
In our view, the Tribunals conclusion that this was an adventure in the nature of a trade is entirely unwarranted by the materials on record. The question is, accordingly, answered in the negative and in favour of the assessee. The assessee will be entitled to her costs (Rs. 250).