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Praise and Co. (Private) Ltd. Vs. Commissioner of Income-tax, West Bengal. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberIncome-tax Reference No. 31 of 1961
Reported in[1966]60ITR566(Cal)
AppellantPraise and Co. (Private) Ltd.
RespondentCommissioner of Income-tax, West Bengal.
Cases ReferredEdwards v. Bairstow
- lalk j. - in this reference under section 66(1) of the income-tax act, 1922 (hereafter stated, in short, as the act), we are-required to give opinion on the question :'whether, on the facts and in circumstances of the case, the surplus of rs. 1,65,906 resulting from the sale of the plot constitutes profit in an adventure in the nature of trade ?'the facts in paragraph 2 of the agreed statement of the case are :'the assessment year is 1953-54, relevant for the calendar year 1952. the assessee was a private limited company carrying on business in share-dealing. in 1950, it purchased a plot of lands at alipore for rs. 3,14,092, out of borrowed capital. it incurred some expenses for digging a tube-well and constructed a small shed. it wrote on 6th november, 1950, to the calcutta electric.....

LALK J. - In this reference under section 66(1) of the Income-tax Act, 1922 (hereafter stated, in short, as the Act), we are-required to give opinion on the question :

'Whether, on the facts and in circumstances of the case, the surplus of Rs. 1,65,906 resulting from the sale of the plot constitutes profit in an adventure in the nature of trade ?'

The facts in paragraph 2 of the agreed statement of the case are :

'The assessment year is 1953-54, relevant for the calendar year 1952. The assessee was a private limited company carrying on business in share-dealing. In 1950, it purchased a plot of lands at Alipore for Rs. 3,14,092, out of borrowed capital. It incurred some expenses for digging a tube-well and constructed a small shed. It wrote on 6th November, 1950, to the Calcutta Electric Supply Corporation to provide electricity. The company also applied for unfiltered water supply and to the telephone authorities asking for telephone connections. A firm of architects was approached for preparing plans for the building to be constructed. In 1952, the plot was sold for Rs. 4,83,617 and an excess of Rs. 1,65,906 was realized...'

The further facts emerging from the orders of the Income-tax Officer, of the Appellate Assistant Commissioner and also from the order of the Appellate Tribunal (which is a judgment of affirmance of the orders of the Tribunal below) are briefly as follows :

(a) One of the assessee-companys directors, Sri K. L. Jatia (shortly hereafter stated as Jatia) is the main figure in the company. The companys staff consists of only one assistant. Its establishment expenses comes to Rs. 675 only. Some of the shareholders of the company were Jatias close relations. Jatia was connected with a number of concerns. One of such concerns is M/s. Onkarmal Kanailal and Co. (shortly stated hereafter as O. K. & Co). It had on January 1, 1950, a credit balance of Rs. 2,35,000 only land on December 31 of the same year, a sum of Rs. 3,47,000. The account shows that all the available money had been invested.

(b) The assessee was also doing business in speculation for a number of years on a large scale. The loss in speculation in shares, in the accounting year, came to Rs. 1,26,591. The stock of shares remaining unsold, at the end of each accounting year, was being shown as investment in the balance-sheet. The profit and loss on the share-dealings was being shown directly in the balance-sheet and not in the profit and loss account.

(c) The assessee was heavily indebted, particularly, after the said purchase of the lands at Alipore, which was financed by borrowing. Its borrowals from O.K. & Co. were Rs. 50,000 on two occasions, in the year 1950, viz., on September 6 and 9. The said total sum of rupees one lakh was first deposited in the Bank of Jaipur; subsequently withdrawn from it on October 12,1950; and was thereafter paid for the lands. On this date, the assessee-company took Rs. 90,000 directly from O.K. & Co. to pay for the land, the total price of which was fixed at Rs. 2,57,701. On November 7 and 16, 1950, the assessee had taken the sum of Rs. 1,50,000 as overdraft from the bank for repayment to O.K. & Co. On July 19, 1952, the assessee paid O.K. & Co Rs. 2,50,000 and utilized the balance to liquidate the bank overdraft which stood at Rs. 2,17,520. On December 31, 1952, Rs. 5,37,000 together with other cash had been advanced to Jatia.

(d) The area of the property purchased was about 68 cottahs (3 bighas and 8 cottahs), that is, more than one acre of lands. It is in Alipore, a fashionable locality for residence at Calcutta. It is not a business area.

(e) The earnest money for the property was paid by the assessee on August 8, 1950. The assessee paid the earnest money for the adjoining plot which was also purchased from the same estate. The said earnest money was immediately recovered from the sale of the portion of the adjacent plot.

(f) The assessee purchased the property at Rs. 3,750 per cottah on October 12, 1950. It was sold through the brokers in July, 1952, in two different portions to two separate companies, namely, Ruby General Insurance Co. and Ganga Property. The sale proceeds, being the total sum of Rs. 4,83,617 (approximately Rs. 7,100 per cottah), were realized by the assessee on July 18, 1952. Four days before this, viz., on July 14, 1952, there is a resolution passed by the assessee-company for realization of an average price of Rs. 6,000 per cottah of land on sale. The assessee offered the lands for sale in the market.

(g) The explanation for purchase given by the assessee before the Income-tax Officer was for constructing a building for the use of the company but the explanation given before the Appellate Assistant Commissioner was for Jatias residence.

(h) The reason for sale given by the assessee before the Income-tax Officer was that the lands became unsuitable for construction and thereafter the project was given up.

The Income-tax Officer referred to clause 9 and held that the present transaction was within the objects of the companys business. He rejected the contention that the plot had been acquired for the object of constructing building for the use of the company because there was no evidence to support it. Even relying on the assessees contention as to the reason for sale, viz., that the assessee later founds the plot 'unsuitable for construction', there was no need, in the opinion of the Income-tax Officer, for such a building, considering, inter alia, the facts that the land was purchased on borrowing and that as no evidence was adduced as to how the assessee could have hoped to find the funds necessary to construct the building on such an extensive land. The Income-tax Officer further found that 'there was no evidence to show that after the purchase of the land, some attempt was made towards the purpose of constructing building by way of either submission of plans or applying to corporation for necessary permission, before the project was given up.' Therefore, he brought the amount to tax as being income from business.

On appeal by the assessee, the Appellate Assistant Commissioner, inter alia, held that the lands was purchased in the ordinary course of the companys business and not as an investment. The purchase was made with a profit-making motive and, therefore, the transaction was a business ventures of the assessee. He accordingly confirmed the assessment. The Appellate Assistant Commissioner also recorded that there was no evidence before him to show that any attempt had been made towards constructing a building on the land. He further noted : (i) that from the account it does not appeal that the purchase of the land did represent any investment of any surplus funds of the assessee-company; (ii) the balance-sheet as on December 31, 1950, showed assets of shares at Rs. 7,23,291 and of landed property at Rs. 3,14,094 against the capital of rupees seven lakhs only; (iii) no correspondence or any other minute books or even office notes relating to the purchase of the property are produced to show what was the real intention with which it was purchased; (iv) the assessee stated before the Appellate Assistant Commissioner that there was nothing in writing regarding the purchase of the property and there was no resolution also by the board of directors regarding the purchase. 'All these facts', according to the Appellate Assistant Commissioner, 'show clearly that the land at Alipore did not represent any investment of surplus funds by the assessee-company.' For these reasons, the Appellate Assistant Commissioner, after considering the object clauses in the memorandum, viz., clauses 5, 8, 9 and 15, and article 131 of the articles of association, concluded that the lands was purchased in the course of day-to-day business.

The assessee thereupon went up in appeal to the Appellate Tribunal. The assessee did not dispute the facts 'Some plans prepared by architects of a house for K. L. Jatia' were put before the Tribunal but it did not 'see how they are at all relevant.' The Tribunal found as a fact that 'all the applications for water, electricity and telephone' seemed to have been made with a view to bolster up the case of intention to build the same. It was also found that there was 'certain amount of foresight, calculation and origination' by the assessee 'in buying up the lands, keeping them and selling them when the price was high.' 'There can be also no doubt' say the members and 'whatever has been done to the plot has been done with view to make it marketable'. In its view, the company cannot build for its director. The Tribunal ultimately upheld the order of the Appellate Assistant Commissioner, which, as already stated, in its turn, confirmed the assessment.

Mr. Mitra, the learned standing counsel appearing on behalf of the applicant-assessee, with his usual thoroughness, contended before us : (1) That it is a case of a solitary isolated transaction which is not in the line of the assessees business; (2) that the onus of proof required to be discharged by the department was not done in the instant case; (3) that the facts stated in the orders of the Appellate Assistant Commissioner and the Income-tax Officer, even though it might be admitted by the assessee, cannot be looked into, i.e., one must not travel beyond the facts as recorded in the order of the Tribunal and in the statement of the case; and (4) lastly, the order of the Tribunal is full of conjectures and surmises.

On the first proposition that it is a solitary isolated transaction, there have been a great many cases in which similar questions have arisen, but I think it is quite unnecessary to discuss all of them in detail except the representative decisions. Mr. Mitra on behalf of the assessee strongly relies on the decision of the Supreme Court in Saroj Kumar Majumdar v. Commissioner of Income-tax. On the other hand, Mr. Meyer, appearing on behalf of the revenue, equally strongly relied on another decision of the Supreme Court in Venkataswami Naidu v. Commissioner of Income-tax The cases of Jones v. Leeming, Inland Revenue Commissioners v. Fraser (Wood-cutters purchase of whisky known as Whisky case), Rellim v. Vise and the case of Janki Ram Bahadur Ram v. Commissioner of Income-tax (to which my learned brother was a party) were cited. Another decision of the Supreme Court, viz., Raja J. Rameshwar Rao v. Commissioner of Income-tax was also relied on. I have also looked into a number of decisions, viz., the cases of Commissioners of Inlands Revenue v. Reinhold, Ryall v. Hoare, Californian Copper Syndicate v. Harris, Martin v. Lowry, Commissioners of Inland Revenue v. Livingston, Rutledge v. Commissioners of Inland Revenue Balgownie Land Trust Ltd. v. Commissioners of Inlands Revenue.

In my judgment no general principle or universal test could be laid down which could given the decision of all cases in which the question for termination is similar to the one now before us. Each case must be determined on the total impression created on the minds of the court by all the facts and circumstances discussed in a particular case. In my view no decided case can, strictly speaking, be a precedent which would govern the decision of a later case involving a somewhat similar question. Sinha J. laid down ten tests in the case of Janki Ram for application to cases of such transactions. Gajendragadkar J. (as his Lordship then was), speaking on behalf of the Supreme Court in Venkataswami Naidus case, however, held that it is impossible to evolve any formula in determining the character of isolated transactions in tax proceedins. To my mind, the decisions can be used only by way of illustrations of the different view-points.

I now proceed to examine the grounds or propositions put forward by Mr. Mitra in support of his contention that the profit resulting from sale of the plot is not an adventure in the nature of trade.

The line of demarcation between the case of isolated transaction of purchase and sales being ventures in the nature of trade and those which are not such ventures is very thin. The nearest case cited was that of Saroj Kumar Majumdar. The facts scrutinized in the said case afford a useful contrast to the case in hand and its distance away, were such computation possible, could be measured in at least two miles. The following are the special features in Saroj Kumar Majumdars case (a) The Tribunals finding in the said case, namely, that the payment was made out of borrowed money or that the assessee was not a man of means (though it was noticed that he suffered loss in the accounting year) was held to be surmises and not well-founded in fact (pages 247 and 249). But in the instant case the admitted position is that the money was borrowed and the assessee was financially involved; (b) it was found that if the assessee did not get out of the transaction, it might lead to the forfeiture of the advance amount of Rs. 32,000 paid by the assessee but there is no question of forfeiture here; (c) the land was not requisitioned and that there was no immediate prospect of the lands being derequisitioned by the Government, but there was no burden on the land in the instant case; (d) the assessee was carrying on an engineering concern and was doing good business at the time of the agreement (page 251) and his case of putting up of the workshop of his own engineering business on a portion of the land and to builds his own residential house on the other portion of the lands, was believed by the tribunals (page 254), but in the case in hand different cases are sought to be made out by the assessee at different times; (e) the area admeasured 45 cottahs (page 245) was not taken as 'so large' for both the purposes of business and residence, but in the instant case 68 cottahs was taken as 'extensive' land for residence; (f) the profit was held as a windfall by the Supreme Court (page 249) which is not so held by the tribunals below; the judgment of the Appellate Tribunal was in reversal of the judgments of the Income-tax Officer and the Appellate Assistant Commissioner but in the case in hand, there have been unanimous judgments from the Income-tax Officer to the Tribunal; (h) the Supreme Court decided under article 136 of the Constitution against the order of the Appellate Tribunal which refused to state the case and the application under section 66(2) to the High Court was filed long after the period of limitation. The reported case did not arise out of the reference from the High Court as in the instant case; and (i) the case was decided on a different setting of the facts.

Some of the other salient facts of the case in hand for having useful comparison with those in the case of Saroj Kumar Majumdar are as follows : (a) the purchase of the land was by borrowing, (b) after purchase, the assessee company was heavily indebted, (c) there was no resolution of the board to purchase the land, though there was a relation a the time of the sale, (d) there was no fund to raise any building, rather there was not attempt to raise any fund; and no evidence was adduced as to how the assessee could have hoped to find the funds necessary to construct the building on such an extensive land, (e) different cases were made at different times for the use of the proposed building, viz., residence of a director, for the directors (in plural), for staff (only one), for companys use, etc. Before the Appellate Assistant Commissioner, the assessees case was that the building was for office accommodation. The terms of appointment of the director for free residence were not produced before the Tribunal for the residential use of the director, Jatia. There is no evidence as to no accomodation for the assessee-company or for its director. (f) The contiguous land from the same estate was purchased and the earnest money paid for the same was immediately recovered; the case of 'unsuitability' sought to be made out by the assessee for not building on the lands before the Income-tax Officer is different from the case made out before the Tribunal viz., 'lack of fund', (g) there was no evidence that it was a case of investment and that the assessee was getting any income, (h) there was also no evidence of the building activity; there was no application before the Corporation under the Calcutta Municipal Act for sanction for erecting such building, (i) the plans were not produced even in the year 1957 before the Income-tax Officer (5 years after the sale) nor thereafter before the Appellate Assistant Commissioner. Even letters were not produced before the Income-tax Officer. (j) The sale was effected within a period of 21 months. The sale price of the land was about Rs. 7,000 per cottach which is about cent per cent. rise in the price. The property was sold to two different companies in two different plots. In effect, there are found transactions, taking the purchase and sale of a portion of; the adjoining plot.

In my judgment it is not possible, rather in expedient, to attempt any formula or rule in determining the character of isolated transactions in tax proceedings. No rule can be deduced, so that the same may be mechanically applied to the facts of each case. The decisions do not purport to lay down any general or universal test. It is to be determined by close scrutiny of evidence in each case. In other words, it must in every case depend on the total effect of all the relevant facts and circumstances which determines the character of the transaction and the presence of which help the court to draw an inference. What is important to bear in mind is the distinctive character.

Although the facts in some cases sometimes point of necessity to the fact that the activity is or is not a trade in law, there is an indefinite neutral area. It is argued that the instant case falls at least into that neutral area. In my view Naidus case showed the right approach in such cases as the present one and it cannot fall into the neutral area.

The learned standing counsels contention could not be accepted to the effect that the decision of the tribunals below was perverse. The facts before them point to an adventure in the nature of trade. By all normal tests of trade, this was a trading activity. Everything which was done here was precisely what is normally done by financiers in this line of activity or part of what is normally understood to be trade. It is no doubt true that one must consider a trading transaction at the time of buying and selling. The transaction was merely a test of machinery. It is also true that the difference between the purchase and the sale price must also be considered. In the instant case it was a genuine transaction and no sham. Nothing is extraordinary. The revenue can never tell the taxpayer how to conduct his trade. The sum of the evidence upon which the Tribunals below made the findings, it must be assumed, that their determination can only have been based on the fact that it is an adventure in the nature of trade.

Even if one may agree to the first proposition of the learned standing counsel as a matter of words, regards must be had to the subsequent dealings and, so viewed, this was not really an isolated transaction but one out of four. When I say isolated, I mean that there was no evidence to show that the assessee had done anything like this before and nothing more. The first contention therefore fails and I hope that I do no injustice to the argument of the assessee if I say that the surplus of the sale price constitutes profit in an adventure in the nature of trade.

In the second proposition it is submitted that the intention must be present to make profit at the time of purchase. If no such intention was there, the onus must be on the department to prove the contrary. Reliance was placed on decision of the Madras High Court in the case of Abubucker Sait v. Commissioner of Income-tax. In the instant case, Mr. Mitra continues with his submission that neither there is any evidence, nor has it been found that the applicant had such can intention. Utmost it might be said, he proceeds, that the situation is equivocal, which would not be sufficient to discharge the onus.

Attractive as this proposition is and nicely though it was advanced by the learned standing counsel, it does not convince me. In my view, the said proposition of law cannot be laid down as an abstract proposition, applicable to all cases, far less to the instant case. The initial intention is doubtedly a relevant circumstance (vide the case of Venkataswami Naidu at page 622), but it might also be founds by the subsequent conduct (page 623) which seems to me to be clear in the case in hand. In the Madras decision, the facts are also different. There the property was agricultural land, which is a 'recognised form of investment'. In the instant case it is not so. The Tribunal agains in the Madras case did not, however, consider the question whether the transactions amounted in law to an adventure in the nature of trade.

The circumstances and facts I have summarised in discussing the first proposition are unequivocal. The assessee entered into a commercial transaction, which though it might be given an invidious name, contained no element of impropriety, must less of illegality. It might be noted that their Lordships of the Supreme Court in deciding the case of Venkataswami Naidu observed in distinguishing Reinholds case that the onus had become relevant because the Commissioners were divided. Moreover, Srinivasan J., who is a party to the judgment in Abubucker Saits case, became a party to another judgment, delivered within a course of 3 months, viz., in the case of S. K. AR. K. AR. Somasundaram v. Commissioner of Income-tax where it seems that the principle laid down in the earlier decision has not been strictly followed.

Of course, human affairs and business affairs are of infinite variety and they do not fit neatly into categories or classes in all cases. But I can find nothing in the instant case that enables me to say that it is not a trading transaction and the question is echoed, as asked by Mr. Meyer, 'If it is not trade, what is it ?'

In the light of such knowledge I may have of the usage in business affairs I must put myself the question whether it is unreasonable to say that the operation of the assessee this case was not trading or that the expression 'trade' does not apply to it. I am not prepared to say that the opinion of the Tribunals below is unreasonable; so unreasonable that it can be dismissed as one which could not reasonably by entertained by them. It is not sufficient that the Tribunal would itself have come to a different conclusion. Reasonable people on the same facts may at items reasonably come to different conclusions, and often do. Juries do. So do judges. Are they not reasonable men But there comes a point when judge can say that no reasonable man could reasonably come to that conclusion. Then, but not till then, he is entitled to interfere.

My. Meyer submitted that the correct approach is whether the findings are warranted on the evidence on record; or, in other words, could it be aid that there was no evidence, upon which the Tribunal could properly base its findings He relied on the said decision of the Supreme Court in Raja J. Rameshwar Rao where Hidayatullah J. held that 'the only thing required is whether there is evidence in support of the conclusion of the Tribunal. It is observed in the other case that the High Court 'examined the record' and found that there was evidence to support the finding. It does not matter, says Mr. Meyer, whether the conclusion could have been otherwise on the same evidence by another Tribunal. It is only necessary, according to him, that there is evidence on the record as is sufficient for the Tribunals findings. Hidayatullah J. in another decision of the Supreme Court in the case of Commissioner of Income-tax v. Jadavji Naridas & Co. held that the scintilla of evidence is sufficient. Shah J. expressed the same view in another decision of the Supreme Court in Commissioner of Income-tax v. Indian Wollen Textile Mills, where his Lordship held that slight evidence is sufficient. Appreciation of evidence cannot be challenged (see bottom of page 55 in Rellims case argues Mr. Meyer. Whisky case support the same view.

The reply of the learned standing counsel is that in all these case the particular question referred to was in that fashion, viz., whether there was evidence. As the form of the question was like that the Supreme Court had answered in that particular way, viz., that there was evidence to support the finding and that the scintilla of evidence was sufficient.

It is difficult for me to accept this argument. The answer matters and not the form of the question. I cannot also accept Mr. Mitras further submission that the expression 'appreciation of evidence' used by Shah J. in the case of Woollen Textiles is not a happy expression and is somewhat contradictory to the expression used in the earlier Supreme Court decisions.

Accordingly, even if there be any onus on the department, it is sufficiently discharged inter present case. I, therefore, find myself unable to discover where I have gone wrong in what I have said on this second proposition.

The third propositions an extension of the earlier two propositions. Rather it harps back to the first. The learned standing counsel took great pains in attempting to differentiate between pure facts, primary facts and inferential facts and placed before us passages after passages for hours from the several decisions and particularly from the decision in Edwards v. Bairstow and also from the Supreme Court decision of Sree Meenakshi Mills v. Commissioner of Income-tax. Mr. Mitra wanted first to clear up the grounds between different categories of facts. Mr. Mitra then argued that the facts appearing in the orders of the Income-tax Officer and the Appellate Assistant Commissioner cannot be looked into as the said orders were not made part of the statements of the case. Only the face found by the Appellate Tribunal, appearing in its order can, according to him, only be looked into. He refers us to the decision of the Allahabad High Court in the case of L. Motilal v. Commissioner of Income-tax. He also pressed the Supreme Court decision in the case of Commissioner of Income-tax v. Calcutta Agency Ltd. to explain the effect of an agreed statement.

In my view, the orders of the Appellate Assistant Commissioner and the Income-tax Officer can be looked into (vide the decision of this court in the case of Humayun Properties v. Commissioner of income-tax. One may refer also to the decision of the House of Lords in the case of Griffiths v. J. P. Harrison where Lord Denning described the primary facts as found by the Commissioner and further stated that the facts cannot be disputed. What is disputed is their conclusion from them. Similar things happened in the case in hand. Here also the facts are not and cannot be disputed. The dispute is about the conclusion arrived at by the Income-tax Officer, affirmed by the Appellate Assistant Commissioner and thereafter by the Appellate Tribunal.

Mr. Meyer, for the revenue, also rightly contends that it is not open to the assessee to challenge the finding without raising it and relies on the proposition of the Supreme Court decision in the case of Guru Estate v. Commissioner of Income-tax. He also cites the said decision of Sarojkumar Majumdar for this purpose.

Short of a definition, the only thing to do is to look at the usual characteristics of a trade and see how the transaction measures up to them. Usually in trade, the trader makes money in trading transaction. But that is not essential. An isolated transaction may do. To make trading profit is also not invariable, though, in the instant case, the Tribunals below found that the profit-motive was present. Pushing aside the preferred gift of such a finding, Mr. Meyer sought to tempt us with the fruit of his own growing, when he said that the object of the transaction was irrelevant. Free of any pre-possession, the transaction is to be looked at. In other words, according to him, one could look only at one-half of the transaction and turn a blind eye to the other half.

I do not believe that there is any rule of law which requires the Income-tax Officer or the Appellate Assistant Commissioner to disregard the object of the transaction as irrelevant or its result. There may be occasional when a reasonable man may turn a blind eye to the facts but this is not one of them. To my mind, the facts founds by the Income-tax Officer and affirmed by the Appellate Assistant Commissioner and more so, when they are not disputed, can be and were properly looked into by the Appellate Tribunal; particularly when no challenge was made about the finding of facts before the Tribunals below.

On the fourth and the last proposition, the learned standing counsel submits that the discussion inter judgment of the Tribunal below, even though partly irrelevant, the whole judgment comes into the arena of conjectures and surmises. The Appellate Tribunal has misdirected itself to come to the findings in the reasoning for necessity of such a building and the order accordingly becomes a pure conjecture. Mr. Mitra puts the question : What does it matter if the company constructs the building for a darwan or a jamadar or, say, for the mistress of the director The revenue department should have no concern with the same. As the onus of the department is not discharged, the order becomes a surmise he repeats. The Supreme Court decisions in Dhirajlal Girdharilal v. Commissioner of Income-tax and that of Dhakeswari Cotton Mills v. Commissioner of Income-tax were pressed. Griffithss case (supra) was also placed. The decision of the Allahabad High Court in Motilals case and the decision of the Supreme Court in the case of Calcutta Agency were also re-read with great emphasis by Mr. Mitra to show that the whole of the order is a speculation.

Mr. Meyers answer is that the order of the Tribunal need not be examined microscopically, sentence by sentence, as is sought to be done by the learned standing counsel. For this proposition he referred to two decisions of the Supreme Court. The first one is that of Bhai Chand Amoluk & Co. v. Commissioner of Income-tax and the second case is that of Homi Jehangir Gheesta v. Commissioner of Income-tax.

The Allahabad decision in Motilals case distinguished by Mr. Meyer that, only for the purpose of a finding, the order of the Appellate Assistant Commissioner can be looked into. In the Supreme Court case of the Calcutta Agency, the facts were taken by the Tribunal not from the record but from the argument of the learned standing counsel; but the same is not the case here. Moreover, other the cases of Dhirajal and Dhakeswari Cotton Mills of the Supreme Court are direct appeals from the decisions of the Tribunal. They do not arise out of the orders from the High Court passed in a reference. According to Mr. Meyer, Griffithss case rather supports the revenue. The ratio in the said decision was to find out whether the opposite conclusion can be arrived at, that is to say, whether the conclusion, contrary to this referred it by the Commissioner, is possible.

In my judgment, it is wrong approach to put the various reasons given into series of separate compartments and then say of each of them, that by themselves, separately they cannot pass the test of conjectures and surmises and that, therefore, the totality cannot pass that test. This is exactly what is attempted by Mr. Mitra in this case. In the line of authorities, culminating in Edwards v. Bairstow I ask myself the same question put by Lord Radcliffe : 'What detail does it lacks that prevents it from being an adventure in the nature of trade, or what element is present in it that makes its capable of being aptly described as anything else'.

The inherent nature of the transaction in the instant case undoubtedly suggests a trading operation. On the facts found by the Income-tax Officer, affirmed by the Appellate Assistant Commissioner and the Tribunal, I am driven to the conclusion that the transaction was an adventure in the nature of trade and the Income-tax Officer had no grounds upon which he could hold that it was not. The fourth and last proposition of Mr. Mitra, therefore, does not also help him.

I beg to add that it is not an exceedingly simple case and we have to give our most anxious consideration. There are different questions of law involves in it. The application of old principles to the particular facts was also considered.

Accordingly to my understanding, and I think authority, it seems to me that in this case, whatever may be the case under different facts, it has all the elements of an adventure in the nature of trade and I am content to hold that the profits made must be assessable to tax and the revenue is justified in so assessing.

I accordingly answer the questions in the affirmative and against the assessee who must pay the costs of this reference to the respondent. Certified for two counsel.

DATTA J. - I agree.

Questions answered in the affirmative.

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