Sudhindra Mohan Guha, J.
1. Upon an application of the CIT, West Bengal-Ill, Calcutta, under Section 66(2) of the Indian I.T. Act (Act XI of 1922), the Tribunal has drawn up a statement of the case and referred the following question to this court for decision :
' Whether, on the facts and in the circumstances of the case and on a proper interpretation of Section 23A of the Indian Income-tax Act, 1922,the Tribunal was correct in holding that the assessee was not a company whose business consisted wholly or mainly in the dealing in or holding of investments and on that basis holding that the order of the Appellate Assistant Commissioner vacating the levy of super-tax by the Income-tax Officer was proper '
2. Admitted facts had it that for the assessment year 1961-62, the assessee-company was assessed to tax of Rs. 17,883 on a total income of Rs. 39,740. Out of the distributable surplus of Rs. 21,857 a sum of Rs. 8,000 only was paid by way of dividend. In the view taken by the ITO the assessee was held to be an investment company liable to further pay Rs. 6,928.50 on account of super-tax then in force.
3. The levy of super-tax was vacated in appeal as the AAC found that the bulk of receipts in the hands of the assessee-company consisted of rents and interest. Holdings consisted mostly of property and for that matter the tests for holding a company to be an investment company had not been satisfied.
4. On departmental appeal to the Tribunal it was pressed home that land and buildings valued at Rs. 57,106 and securities valued at Rs. 1,34,319 were held by the company. Interest earned was Rs. 3,227 and advances made amounted to Rs. 91,760. It was accordingly urged on behalf of the revenue that the assessee had substantial income from investments which should attract liability to also pay the super-tax exigible on investment companies.
5. Opposing the plea, it was canvassed on behalf of the assessee-company that its paid up capital was Rs. 2,00,000, that land and buildings were worth Rs. 1,57,406.19, that loans advanced amounted to Rs. 91,75.59 and that investment in shares was only Rs. 1,34,318.94. It was urged that the principal business of the company was not acquisition of shares, stocks, debentures, securities and hence the company was not wholly or mainly dealing in investments within the meaning of Section 372(2) of the Companies Act.
6. The Tribunal accepted the contention of the assessee and upheld the appellate order passed by the AAC. Hence, this reference at the instance of the revenue.
7. There has been no denying that this reference had arisen out of the Tribunal's said order and that a substantial question of law was involved as to the meaning to be ascribed to the word ' investment '.
8. In order to arrive at the answer it would be necessary at the outset to precisely find out the meaning of the word ' investment ', which term had not been defined in the Act, though Section 23A thereof referred or related to companies whose business consisted wholly or mainly in the dealing in or holding of investments. In the view taken by the Supreme Court in NawnEstates (P.) Ltd. v. CIT : 106ITR76(SC) , such companies are not limited to companies whose principal business was the acquisition and holding of shares, debentures, stocks or other securities but covered companies whose primary or principal source of income was house property or capital gains as well. The learned counsel for the Union of India, relying upon the said decision of the Supreme Court, sought to emphasise that the term 'investment' was not a term of art and resort should be had not to its technical but to its popular meaning. In deciding that case the Supreme Court was pleased to notice that Nawn Estates (P.) Ltd. had been incorporated with the object of purchasing lands and buildings and its major income was derived from those properties. But it should be remembered that mere holding of investments per se would not make the company an investment company (Great Pyramid Insurance Co. Ltd. v. CIT : 102ITR394(Cal) ). Having regard to the principles enunciated hereinbefore it is to be enquired what was the main part of the business of the assessee. There is no exclusive test in arriving at the decision. But there can be no denial of the fact that the burden of proof lies on the revenue to establish that the business of the assessee fell within Clause (i) of the second Explanation to Section 23A of the Indian I.T. Act, 1922, and that such business consisted mainly in the dealing in shares, etc. A company which came within the scope of these provisions must be one whose primary business must be ' in the dealing in or holding of investments '. On behalf of the assessee reliance is placed on the decisions of the Gujarat High Court in Distributors (Baroda) P. Ltd. v. CIT : 69ITR614(Guj) and of the Supreme Court in that case reported in CIT v. Distributors (Baroda] P. Ltd. : 83ITR377(SC) . According to the Supreme Court, Section 23A applied only in cases when the primary activity of the company was in ' the dealing in or holding of investments '.
9. In order to bring a company within the mischief of Section 23A of the Act, it must be held that the company carried out real, substantial or systematic or organised course of activity of investment for a set purpose such as earning of profits. According to the assessee there was no iota of evidence to establish that the assessee had any business whatsoever in the dealing in or holding of investments. In the above premises relying on the decision in Charmugaria Trading Co. Ltd. v. CIT : 110ITR715(Cal) it was faintly suggested that the court might direct the Tribunal for collecting evidence to find out whether the assessee had been carrying business in dealing or holding of investments. But we think that the materials before us are sufficient for answering the point.
10. In Nawn Estates (P.) Ltd. v. CIT : 106ITR76(SC) , as. noted earlier, the company itself had been incorporated with the object, inter alia, of purchasing lands and buildings and letting them out and it had been-investing monies in house properties yielding its major income. As such the company was found to be ' a company whose business consisted wholly or mainly in the holding of investments ' within the meaning of Section 23A of the Indian I.T. Act, 1922. But in the case in hand there was no material suggesting that its principal business was acquisition of shares, stocks, debentures or other securities or the company had been wholly or mainly dealing in or holding of investments.
11. In view of the foregoing findings, we answer the question in the affirmative and in favour of the assessee. Parties to bear their respective costs.
Sabyasachi Mukharji, J.
12. I agree.