1988 (11) TMI 3 - HC - Income Tax

Summary

Issues:
1. Discharge of advocate firm as representatives of the assessee.
2. Whether a sum was chargeable as profit from an adventure in the nature of trade.

The judgment delivered by S. P. Bharucha J. pertained to a reference made by the Revenue regarding the discharge of an advocate firm representing the assessee. The advocate, Mr. C. N. Mistry, sought discharge for lack of instructions, but as no appearance was filed, it was assumed that the assessee was aware of the hearing but chose to remain absent. The main issue raised in the reference was whether a specific sum was chargeable as profit from an adventure in the nature of trade. The court noted that the facts were similar to a previous judgment in CIT v. Himalayan Tiles and Marbles P. Ltd. [1975] 100 ITR 177, where a similar question was addressed.

The case involved the assessee taking over claims from a third party before being taken over by the assessee itself. The sums involved in the claims were paid to the third party, and subsequently, an arbitration award was received in favor of the assessee. The Income-tax Officer treated the balance amount from one of the claims as profit from an adventure in the nature of trade, a decision upheld by the Appellate Assistant Commissioner but reversed by the Income-tax Appellate Tribunal. However, the High Court, based on the precedent in CIT v. Himalayan Tiles and Marbles P. Ltd., upheld the Income-tax Officer's decision, considering the amount as assessable income.

Another claim settled in a subsequent year resulted in a balance amount, which the Income-tax Officer also treated as profit from an adventure in the nature of trade. This decision was overturned by the Appellate Assistant Commissioner and the Tribunal, aligning with the earlier judgment. The High Court, following the precedent set in CIT v. Himalayan Tiles and Marbles P. Ltd., ruled in favor of the Revenue, considering the amount as profit from an adventure in the nature of trade. The judgment did not award costs to any party involved in the case.