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TMI Blog1984 (3) TMI 150X X X X Extracts X X X X X X X X Extracts X X X X ..... lant could be purchased at a reasonable price and thereafter it could be sold at a profit. On these facts, the assessee-company in its resolution dated1-1-1969resolved that Mr. Bajaj was authorised to make enquiries about the margarine plant atBangaloreand to negotiate the purchase of the said plant. 3. Pursuant to the said authority, Mr. Bajaj negotiated for the purchase of the margarine plant atBangaloreand these negotiations have been successfully completed. According to the settlement arrived, the purchase price together with the expenses to be incurred for purchasing it came to about Rs. 1 lakh. This fact was brought to the notice of the board of directors of the assessee-company at the meeting held on6-5-1969. Mr. Bajaj also informed in the said meeting that the plant had been imported by theBangaloreparty many years ago and a buyer may not agree to offer a good price, as it may be felt that the plant was bad and not useable. Mr. Bajaj, accordingly, suggested that the plant should be properly installed, shown to potential buyers with a view to prove that it could be worked satisfactorily and that its working would yield profits to the buyers. On these facts, the board of di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s considered and passed by their board of directors. It is hoped that plant will be sold to Amrit Banaspati Co. Ltd. at reasonable figure which will have substantial amount of profit for the company. The directors have to place on record the facts that the management of this company has been devoting a great deal of time and attention to this plant and its installation. A considerable portion of the expenditure incurred by the company related to this plant but as it was purchased and installed only with a view to sell it at a profit, such expenditure was always debited to profit and loss account. " 9. This was followed by the meeting of the board of directors held on 11-3-1974 when it was resolved that the plant was to be sold to Amrit Banaspati Co. Ltd. for a total value of Rs. 3,50,000. Prior to the said resolution, the chairman of the assessee-company informed the board that Amrit Banaspati Co. Ltd. had ultimately decided to take over the margarine plant and machinery in its final shape after working it for a period of over about 12 months to their full satisfaction and that the sale of the said plant would result in substantial profit to the assessee-company. 10. In the mee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received by the Commissioner (Appeals), he has once again held that the profit earned by the assessee on the sale of the said margarine plant represented a business profit by observing as under : " I have myself again seen the extracts of the minutes of the meeting of the board of directors referred to above and it is very clear from these minutes that the intention of the board of directors of the appellant company from the very beginning was to purchase the margarine plant at Bangalore with the sole intention of selling it at a profit. I, therefore, find no hesitation in confirming the finding of the AAC given earlier in his order dated 29-3-1976 that the sum of Rs. 1,75,034 should be treated as a business profit of the appellant resulting from a transaction as an adventure in the nature of trade and the same has to be treated as such for the purpose of set off of the brought forward business losses of the preceding assessment years as per the provisions of section 72(1)(i) read with the proviso thereafter of the Income-tax Act, 1961. As mentioned earlier the appeal has been restored on my file for the specific purpose of fulfilling the provisions of sub-rule (3) of rule 46A w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nning the said plant is available only in a vanaspati manufacturing unit. The said raw material becomes available with an assessee already manufacturing vanaspati and the same is available at a stage prior to the ultimate manufacture of vanaspati. There is no basis and evidence or material on record to prove the assertion made by the ITO in the remand report that the plant purchased had a close link with the business of the assessee-company, namely, manufacture and sale of desi ghee. As such for the successful working of a margarine plant, the person holding it should be one which was already manufacturing vanaspati. It is also a fact that the assessee-company as such was not manufacturing vanaspati. It is also a fact that the assessee-company did not have funds of its own to buy the plant. It had to resort to borrowings for this purpose. The interest payable in respect of the said borrowings, which were utilised for the purchase and installation of the said margarine plant, was not added to the cost of the plant. The same was, however, claimed by the assessee as revenue expenditure and allowed as such in the respective assessments of the assessee. Furthermore, certain other overhe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e circumstances of the case, e.g., the nature and quantity of the article purchased and the nature of the operations involved, whether the venture is on capital account or in the nature of trade. A transaction is not necessarily in the nature of trade because the purchase was made with the intention of resale---Ajax Products Ltd. v. CIT [1961] 43 ITR 297 (Mad.). The intention to resell may in conjunction with the conduct of the assessee and other circumstances, point to the business character of the transaction. See also in this connection the decision of the Supreme Court in G. Venkataswami Naidu Co.v. CIT [1959] 35 ITR 594. Applying the said law to the facts as found and stated in the preceding para, we find that the assessee had purchased the margarine plant, which was not in its line of business, with intention to resell it for profit. The assessee by its conduct has treated the above transaction an adventure in the nature of trade. Close proximity between the purchase of the plant and its sale exists in this case, which when considered in the circumstances brought out in para 17 above proves that the assessee-company had embarked upon an adventure in the nature of trade. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X
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