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TMI Blog1962 (8) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... undivided family, and got assets worth about four lakhs of rupees. He purchased from one V.S.P. Subramaniam Chettiar a tea estate in Ceylon called Agra Oya Estate, which consisted of 382 acres bearing mature crops and 62 acres of unplanted area. He purchased this estate for a sum of ₹ 4,50,000 on December 5, 1953. He had the services of a broker in making the purchase to whom he paid a brokerage of ₹ 1,250. Even on the date of the purchase the estate was under mortgage for a sum of ₹ 67,500 in favour of the Industrial Credit Corporation, Ceylon. Necessarily he took over this liability as part of the consideration payable. He paid in cash to the vendor a sum of ₹ 1,32,500 which he obtained by borrowing from various p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sum of ₹ 2,500 as expenditure not laid out or expended solely and exclusively for the purpose of the business. The balance loss of ₹ 10,112 was allowed and the result was the taxable amount was determined as ₹ 28,630 (Rs. 38,742 minus ₹ 10,112). The view of the Income-tax Officer was that the assessee did not purchase the estate as an investment but purchased and sold it as part of a business venture. The assessee went up on appeal to the Appellate Assistant Commissioner, who however confirmed the decision of the Income-tax Officer. There was a further appeal to the Income-tax Appellate Tribunal by the assessee; but that appeal also failed. At the instance of the assessee, the Tribunal has referred the following ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lged in a business venture. It is not necessary that a profit should be purely fortuitous before it can be an enhancement of capital. A design to make a profit may as much occupy the mind of an investor as the mind of one who ventures into a trade. One useful test which can be applied to determine whether a venture is or is not in the nature of trade would be whether the operations involved in it are of the same kind and carried on in the same way as those which are characteristic of ordinary trading in the line of business in which the venture was made (per Lord Clyde in Inland Revenue Commissioners v. Livingston [1926] 11 Tax Cas. 538, 542-43. The distinguishing mark which differentiates a trading adventure from an ordinary transaction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h income would only be in the region of about ₹ 30 to 35 thousand. Assuming that the newly bought estate would yield an income of ₹ 20,000 per year, the total income of the assessee would be about ₹ 55,000. Out of this he has to pay the tax and public charges, incur his ordinary household expense and also pay interest on the mortgage amounts. After making this deduction very little would be left to the assessee to discharge the principal of the mortgage loans. It must have been quite clear to the assessee that in the state of his financial circumstances he could not have hoped to discharge the mortgages and preserve the estate as an income yielding estate for himself. Having regard to the fact that the estate was purchased ..... X X X X Extracts X X X X X X X X Extracts X X X X
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