1959 (12) TMI 64 - HC - Income Tax

Summary

Issues:
Whether a sum of Rs. 2,59,399 should be included in the computation of the profits of business carried on by the assessee in the assessment year 1951-52. The main contention is whether the income derived is exempt under section 4(3)(vii) of the Income-tax Act as a casual and non-recurring nature not arising from business.

Analysis:
The case involved a dispute regarding the inclusion of a specific sum in the assessee's business profits for the assessment year 1951-52. The assessee, a registered firm, had made forward purchases of dollars and sterling for the purpose of a contract with Messrs. Columbia International (India) Ltd., which eventually did not materialize. The dollars and sterling purchased by the assessee were sold by the Netherlands Trading Society Ltd., resulting in a loss on sterling and a profit on dollars. The Income-tax Officer added the balance of Rs. 2,59,399 to the assessee's income, which was objected to on the grounds that it was a capital receipt and exempt under section 4(3)(vii) as a non-recurring nature not arising from business.

The Appellate Tribunal held that the income was not in the nature of capital gains but was a profit incidental to the normal business of the assessee. The main argument raised before the High Court was whether the income derived was from the ordinary business of the assessee or from an unsuccessful attempt to start a new business. The Tribunal's finding was that the import of hardware was a trading activity in the course of the normal business of the assessee, which was that of a general importer of goods. The Court noted that the assessee did not raise the argument of a new business attempt before the Tribunal or the lower authorities, making it impermissible to introduce this argument at this stage.

The Court considered the materials on record, including the findings of the Income-tax Officer, and concluded that there was sufficient evidence to show that the income in question was derived from the normal business activities of the assessee. Therefore, the Court answered the question referred by the Tribunal in the affirmative, indicating that the sum of Rs. 2,59,399 should be included in the assessee's business profits for taxation purposes. The application under section 66(2) was summarily dismissed, and the assessee was directed to pay the costs of the reference. Both judges, S. C. Lahiri C.J. and R. S. Bachawat J., concurred with the decision to answer the question in the affirmative.