1965 (5) TMI 38 - HC - Income Tax

Summary

Issues Involved:
1. Whether the surplus from the sale of the plot constitutes profit in an adventure in the nature of trade.
2. Whether the onus of proof was sufficiently discharged by the department.
3. Whether the facts stated in the orders of the lower authorities can be looked into.
4. Whether the order of the Tribunal was based on conjectures and surmises.

Detailed Analysis:

Issue 1: Whether the surplus from the sale of the plot constitutes profit in an adventure in the nature of trade.

The main question is whether the surplus of Rs. 1,65,906 from the sale of a plot of land by the assessee-company constitutes profit in an adventure in the nature of trade. The assessee, a private limited company, purchased the land in 1950 for Rs. 3,14,092 using borrowed capital and sold it in 1952 for Rs. 4,83,617. The Income-tax Officer, Appellate Assistant Commissioner, and Appellate Tribunal all held that the transaction was a business venture and not a mere investment. The Tribunal found that the company's activities, including the purchase and sale of the land, were conducted with a profit-making motive, and the land was purchased in the ordinary course of the company's business. The Tribunal also noted that the company did not produce any evidence of attempts to construct a building on the land, and the land was sold within a short period, indicating a trading activity.

Issue 2: Whether the onus of proof was sufficiently discharged by the department.

Mr. Mitra, representing the assessee, argued that the department did not discharge the onus of proving that the transaction was an adventure in the nature of trade. However, the court held that the initial intention to make a profit is relevant but can also be inferred from subsequent conduct. The facts, such as the purchase being made with borrowed money, the lack of evidence of any building activity, and the quick sale of the land at a higher price, supported the conclusion that the transaction was a trading activity. The court found that the department had sufficiently discharged its onus of proof.

Issue 3: Whether the facts stated in the orders of the lower authorities can be looked into.

Mr. Mitra contended that only the facts found by the Appellate Tribunal should be considered and not those in the orders of the Income-tax Officer and Appellate Assistant Commissioner. The court, however, held that the orders of the lower authorities could be looked into, especially when the facts are not disputed. The court referred to previous decisions to support this view, stating that the primary facts found by the lower authorities are relevant and can be considered by the Tribunal.

Issue 4: Whether the order of the Tribunal was based on conjectures and surmises.

Mr. Mitra argued that the Tribunal's order was full of conjectures and surmises, particularly regarding the necessity of constructing a building on the land. The court rejected this argument, stating that the Tribunal's findings were based on evidence and reasonable inferences. The court emphasized that the totality of the facts and circumstances must be considered, and the Tribunal's conclusion that the transaction was an adventure in the nature of trade was supported by the evidence on record.

Conclusion:

The court concluded that the transaction was indeed an adventure in the nature of trade, and the surplus from the sale of the plot constituted profit assessable to tax. The court answered the questions in the affirmative and against the assessee, who was ordered to pay the costs of the reference to the respondent.