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Issues Involved:
1. Whether the provisions of the Hyderabad Income-tax Act, in so far as they purport to levy a tax on income from jagir or Samsthan, are ultra vires and inoperative. 2. Whether there was evidence on which the Tribunal could have concluded that the sum of Rs. 75,820 was the assessee's income from business. 3. If the answer to question No. 2 is in the negative, whether the assessee is entitled to claim as a revenue expenditure the money spent on the acquisition of the village of Madanapur, on the construction of houses, etc., and on the acquisition of 217 acres of land. 4. Whether the assessee is entitled to claim as a revenue deduction the sum of Rs. 70,000 paid by him to Sridhar Reddy and his two sisters. Detailed Analysis: Issue 1: Ultra Vires and Inoperative Provisions of the Hyderabad Income-tax Act This issue was not argued by the learned counsel for the assessee, so it was not addressed in the judgment. Issue 2: Evidence of Income from Business The primary question was whether there was evidence for the Tribunal to conclude that Rs. 75,820 was the assessee's income from business. The court examined the definition of "business" under Section 2(4) of the Hyderabad Income-tax Act, which includes any trade, commerce, or manufacture or any adventure or concern in the nature of trade, commerce, or manufacture. The court cited precedents such as Hudson's Bay Co. v. Stevens and Gajalakshmi Ginning Factory v. Commissioner of Income-tax to illustrate that the intention to make a profit at the time of acquiring property is crucial in determining whether an activity constitutes a business. The court found that the assessee's actions-purchasing land, converting it into house sites, and selling them-were part of a profit-making scheme. The Tribunal's finding that the assessee carried on a profit-making scheme was a finding of fact, which is binding on the High Court unless it is perverse or unsupported by evidence. The court concluded that there was ample evidence to support the Tribunal's conclusion. Issue 3: Revenue Expenditure Claim The third question was whether the assessee could claim as revenue expenditure the money spent on acquiring the village of Madanapur, constructing houses, and acquiring 217 acres of land. The court noted that the Income-tax Officer allowed the claim for expenditure but rejected the claim to treat the sale proceeds as a capital receipt. The court found that the question of whether the gross or net expenditure should be deducted from the jagir income was the real dispute. The court amended the question to clarify that it pertained to whether the assessee could claim the gross expenditure without deducting the sale proceeds. The court held that the expenses incurred on the scheme should be the net expenditure, i.e., the amount spent minus the amount realized from selling the plots. The court reasoned that the entire scheme of improvement was an integrated one, and the expenses could only be ascertained by considering both payments and receipts. Issue 4: Revenue Deduction Claim This issue was not argued by the learned counsel for the assessee, so it was not addressed in the judgment. Conclusion: The court concluded that the Tribunal's finding that the assessee carried on a business was supported by evidence and was not perverse. The court also held that the assessee could only claim the net expenditure incurred on the scheme as a revenue deduction. The assessee was ordered to pay the costs of the Commissioner of Income-tax, Hyderabad, with an advocate's fee of Rs. 250.
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