SRINIVASAN J. - The assessee, Rukmani Company Private Ltd., purchased in March, 1947, a decree from one Sundaram Chettiar. Sundaram Chettiar held the decree against the zamindar of Oothumalai and it was for the face value of Rs. 1,44,035. The assessee made the purchase for the sum of Rs. 41,200 only. Thereafter, various steps were taken by the assessee in the court to recover the decreed amount. A short while after the purchase, the enactment abolishing zamindaries came into force, as a result of which the assessee as one of the creditors of the zamindar was enabled to obtain payment from the compensation amount payable to the zamindar by the State. During the account year relevant to the assessment year 1956-57, the assessee realised a sum of Rs. 1,38,240 and after deducting his total outlay upto that date of Rs. 69,360 made a profit of Rs. 68,880. In the return for that assessment year, however, the assessee while showing the profit,claimed exemption as income of a casual and non-recurring nature. It was also contended before the Income-tax officer that the outlay was made as an investment. The claim either as a casual or non-recurring receipt, or as an accretion to capital, indicated by these contentions, was rejected by the Income-tax Officer, who held that notwithstanding that the transaction was an isolated one, it was nevertheless in the nature of a business adventure. He examined the circumstances under which the assessee purchased the decree and on the facts felt convinced that the purchase itself was as a business proposition. The amount was accordingly brought to tax. An appeal was taken to the Appellate Assistant Commissioner, who agreed in the view taken by the Income-tax Officer. The further appeal to the Tribunal, stressing that the profit was casual and non-recurring also failed, the Tribunal taking the view that the only motive which prompted the assessee in purchasing the decree must have been to put it into execution and realise the amount covered thereby with a view to make a profit thereon. There was no doubt a spirit of speculation which entered into the transaction. Nevertheless, the transaction itself was not so wholly foreign to the scope of the money-leading business of the assessee that it could be regarded as not yielding taxable income.
It is in these circumstances that on the application of the assessee under section 66(1) of the Indian Income-tax Act, the following questions stand referred to u :
'1. Whether the inference of the Tribunal that the profit of Rs. 68,880 is a profit from a venture in the nature of trade or from speculation not wholly outside the scope of money-lending is correct is law?
2. Whether the sum of Rs. 68,880 is not assessable to tax?'
A few further facts may be mentioned. The succession to the zamindari of Oothumalai opened in 1922. There were several claimants and a number of suits were filed in the sub-court, Tirunelveli. One Subramaniam Chettiar entered into a financing arrangement with the claimant who ultimately succeeded. This litigation went on for several years. Ultimately. the zamindar of Oothumalai, who benefited form the financing arrangement, chose to repudiate it, and this led to the filing of a suit by the financier against the zamindar. For the purpose of prosecuting the suit, this Subramaniam Chettiar sought the help of Sundaram Chettiar. Sundaram Chettiar advanced the necessary funds to Subramaniam Chettiar with a stipulation regarding interest. The suit was ultimately compromised in the year 1945, and Sundaram Chettiar obtained a decree with a second charge over the zamindari property. During the couple of years preceding the sale or assignment of the decree by Sundaram Chettiar in favour of the assessee, Rukmani Company, Sundaram Chettiar expended moneys in his attempts to realise the fruits of the decree. In 1947, he transferred the decree to the assessee, and as has been stated, the assessee company realised the amount from the compensation deposited with the Estates Abolition Tribunal.
That the assessee company does business as a money-lender is an undisputed fact. It is also seen from the appellate order that Sundaram Chettiar himself was one of the constituents of this company and he had borrowing transactions with the company. Indeed, as the Appellate Assistant Commissioner points out, the company had very few debtors, that is to say, it made advances and granted loans to only selected parties, one of whom was this Sundaram Chettiar. It is not quite clear whether Sundaram Chettiar had borrowed the moneys from Rukmani and Co., the assessee, for the purpose of making advances to Subramaniam Chettiar or for financing the suit laid by Subramaniam Chettiar to recover the monies from the zamindar of Oothumalai. It is possible that he did both. But even leaving that consideration apart, the question is whether the purchase of the decree from Sundaram Chettiar, though no doubt an isolated transaction, was an adventure in the nature of trade.
It has been contended by Mr. R. Venkataraman, learned counsel for the assessee, that the circumstances would clearly establish that the conclusion reached by the Tribunal is incorrect. It is urged that it could not be predicated at the time the assessee purchased the decree that the assessee would be able to realise anything out of it. But that is a risk which every adventurer takes and solely for that reason it cannot be said that it was not at all in the nature of a trade. Learned counsel places strong reliance upon Mothay Gangaraju v. Commissioner of Income-tax. In that case, the assessee, who was a land-owner and a moneylender, purchased in court auction the right, title and interest of a person in certain legacies for the value of Rs. 39,800. That person whose interest was so purchased was not one of the debtors of the assessee. After protracted litigation for the legacies, he ultimately recovered a sum of Rs. 1,97,025. The department sought to bring to tax the excess of the realisation over the expenditure on the ground that it was an adventure in the nature of a trade. The learned judges held that the particular transaction had no connection whatever with the money-lending trade or other activities of the assessee and that it was an isolated transaction, though probably speculative, and reached the conclusion that the profit realised was not taxable. The learned judges observe :
'The activities of the assessee were limited to lending money, owing land, if that can be called trade, and having an interest in cotton mills, and this is in no sense a transaction related to any of those activities. In this case, the interest in the legacies was not even purchased from anybody who was indebted to the assessee in his money-lending business. It was an isolated transaction, although probably entered into by him as a speculation, as he happened to make a good profit out of it. We are quite unable to see that it has any connection whatever with any of the other trades or business carried on by the assessee. By itself, the purchase of an interest in legacies, the subject of litigation cannot certainly be described as a trade or business.'
In so far as the ultimate decision in that case proceeded, we find no difficulty in saying that that decision was related to the peculiar circumstances of that case. In every case where the question is whether a transaction is an adventure in the nature of trade, it is inevitable that all the surrounding circumstances have to be taken into account and merely because a purchase or sale is involved, it does not immediately follow that it is a business venture. We are unable to accept the contention of the learned counsel that the above decision decides the point in his favour.
We may refer to Venkataswami Naidu and Co. v. Commissioner of Income-tax. Their Lordships of the Supreme Court observed that where an adventure in the nature of trade is concerned, there is clearly an underlying suggestion that the transaction in question cannot properly be regarded as trade or business. It may be characterised by some of the essential features that mark a trade or business, but not by all of them, so that even isolated transactions can satisfy the description of an adventure in the nature of trade. They also indicated that the motive which impelled the assessee to enter into the transaction is certainly of great importance. If the purchase itself was made solely and exclusively with the intention to resell at a profit and the purchaser had no intention of holding the property for himself or otherwise enjoying or using it, the presence of such an intention is a relevant fact and would raise a strong presumption - until rebutted - that the transaction is an adventure in the nature of trade. In this decision, their Lordships pointed out the various instances which fall on this side or that side of the line - cases of investments followed by profitable resales, cases where the purchaser was a trader and the transaction related to trading in the commodity allied to his usual trade, acts which both preceded and succeeded the transaction in question, the incidents associated with the purchase and sale and other features, all of which, in the opinion of their Lordships, have to be considered as a whole in reaching the conclusion on this head.
In another decision of the Supreme Court, Saroj Kumar Mazumdar v. Commissioner of Income-tax, it was observed that the line of demarcation between cases of isolated transactions of purchase and sale which are ventures in the nature of trade and those which are not such ventures, if any, was very thin, and they held that the total impression created on the mind that the dominant intention of the assessee was to remark on a venture in the nature of trade should control the ultimate decision in any instant case.
In Abubucker Sait v. Commissioner of Income-tax, to which one of us was a part, it was observed that one of the important matters to be considered in deciding whether a transaction of purchase and re-sale amounts to an adventure in the nature of trade is the intention to trade, which intention must be present at the time of the purchase. It would be otherwise where property was purchased in the ordinary course without the existence of such an intention at the time of the purchase though the subsequent resale might yield a profit.
It hardly seems credible that the assessee, which is a money- lender by profession, made an investment in the purchase of a money decree. It is true that this decree was not obtained in discharge of any debt which was owing to the assessee by the holder of the decree. But what was the intention which the assessee had at the time of the acquisition of this decree, it is pertinent to enquire. Undoubtedly, the assessee intended to put the decree into execution and realise the amount as part of its normal operations for earning a profit in its business. It was not the acquisition of an asset which the assessee intended to keep as such for the purpose of its own enjoyment thereafter. That is undoubtedly impossible in the case of a money decree, which is certainly a transient asset in the sense that the life of the decree as a decree is of a short duration. It is indisputable therefore that even at the time of the acquisition of this asset, the intention of the assessee must have been to resell it. One of the indicia which would indicate the nature of the transaction, whether it is an adventure in the nature of trade or not, is quite apparent on the face of the transaction itself. It is true that the assessee has not made it a business of purchasing decrees and realising moneys therefrom. If it had such a line of business, then there would be no question but that the profit from this transaction would be an assessable profit. The difficulty arises only because this is a single transaction of that kind. The case of Mothay Gangaraju v. Commissioner of Income-tax does not seem to us to have much application here, for the assessee in that case, though a money-lender, did not purchase a money decree as it were but purchased what might be called intangible immovable property in the shape of the right, title and interest of another party in a legacy under a will. It could more properly be described as an acquisition of a chose-in-action. Had it bee a case where that person had advanced moneys for the litigation with regard to the legacies, it might well be that the conclusion reached by the learned judges would have been different. Having regard to the fact that the assessee in the present case is a money-lender and Sundaram Chettiar from whom the decree was purchased was himself one of the customers of the assessee in the present case is a money-lender and Sundaram Chettiar from whom the decree was purchased was himself one of the customers of the assessee and that the assessee must necessarily have had the intention of converting the decree into money at an early date, we would class this as a case, which even if it cannot be wholly described as an adventure in the nature of trade, yet partakes of many of the features of an incident in the line of the assessees own business.
A decision rendered by us in T.C. No. 15 of 1959 has also been partly relied upon. That was a case where in execution of a decree a property was acquired. This property was later sold at a profit, which profit was sought to be taxed by the department. It was held that it was not a transaction in the nature of trade. This case affords us a very good example as an instance of the observations made by their Lordships of the Supreme Court that in every case where an adventure in the nature of trade is involved, it is the net result of all the features surrounding the transaction that should be had regard to and that no set rule or principle can be laid down in reaching such a conclusion. What happened in this case was that the widow, a member of a Hindu family, was the judgment debtor in a decree obtained against the family estate. The family residential house was itself brought to sale in execution of the decree and the widow had the property purchased benami for her in court auction. In order to smoothen further difficulties cause by the other family relations, the widow had the property sold to her own sister-in-law and derived certain profit from the transaction and it was that profit that was sought to be taxed as arising out of an adventure in the nature of trade. The principal ground that led to the conclusion that it was not a taxable transaction was the undeniable fact that the widow who so purchased the property had no intention of reselling it. It was part of the family properties, in fact, the family residential house, which she intended to acquire for her own use and enjoyment. But for the fact that she was compelled to part with the property in favour of her sister-in-law, as a result of trouble caused by the sister-in-law and the mother-in- law, the assessee offered evidence to show that she would herself have continued to possess and enjoy the property. There was no dominant intention at the time of the purchase of effecting a resale of the property. It was in these circumstances that this court held that there was no adventure in the nature of trade involved in that transaction. That case did not lay down any proposition that the purchase and sale of a decree would in no case contain the elements of an adventure in the nature of trade.
It seems to us that the Tribunal reached the right conclusion that the profit arising form this transaction was assessable. Both the questions are answered against the assessee, who will pay the costs of the department. Counsels fee Rs. 250.