1960 (8) TMI 98 - HC - Income Tax

Summary

Issues Involved:
1. Whether the Tribunal was justified in treating the sum of Rs. 27,694 as income assessable to tax.
2. Whether the properties sold by the assessee were part of the stock-in-trade of its money-lending business or investments.

Issue-Wise Detailed Analysis:

1. Justification of the Tribunal in Treating Rs. 27,694 as Assessable Income:
The Tribunal treated the sum of Rs. 27,694 as income assessable to tax, asserting that the assessee-bank was also a dealer in real property. However, the High Court disagreed, noting that there was no material evidence to support the Tribunal's finding that the bank was engaged in real property trading. The Court emphasized that the bank's memorandum and articles did not permit it to carry on any trade in immovable property. The High Court concluded that the bank was not a dealer in properties and that the Tribunal's view lacked logical foundation.

2. Nature of the Properties Sold by the Assessee:
The High Court examined whether the properties sold were part of the stock-in-trade of the bank's money-lending business or investments. The Court noted that the bank had taken over properties in discharge of debts and subsequently sold them, treating the surplus as part of its taxable income. The Court distinguished between the four items of properties in question:

- Three Properties Acquired in Court Sales: These properties were purchased in execution of decrees held by the bank against its debtors. The bank improved these properties and received rental income from them. The High Court held that these properties remained part of the stock-in-trade of the bank's money-lending business, as they were acquired in the course of realising debts and the income from these properties was merged with the bank's other income.

- One Property Purchased in 1931: This property was acquired not in lieu of debts but for the bank's own use. The High Court found that this property constituted a capital investment and was not part of the stock-in-trade of the bank's money-lending business. Consequently, any profit made from its sale was not incidental to the bank's money-lending activities.

Conclusion:
The High Court concluded that the profit from the sale of the three properties acquired in court sales was assessable as income from the bank's money-lending business. However, the profit from the sale of the property purchased in 1931 was not assessable as such income. Therefore, out of the total sum of Rs. 27,694, only Rs. 14,357-11-9 was assessable to tax. The Court made no order as to costs since neither party wholly succeeded.