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TMI Blog1976 (9) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... ved from M/s. Orissa Cement Ltd. was pursuant to an adventure in the nature of trade and as such taxable under the Indian Income-tax Act, 1922?" The High Court has answered the question in the affirmative. We shall refer to the facts giving rise to the controversy in some detail when we state them in a chronological order. It may be mentioned, meanwhile, that the Dalmia Cement Ltd., hereinafter called the appellant, owned certain cement factories and it placed an order for the supply of four complete units of cement manufacturing machinery with M/s. F. L. Smidth and Co., Copenhagen, on February 7, 1946, to increase the production in the following factories : 1. Shantinagar, 2. Dandot, 3. Dalmianagar, 4. Dalmiapuram. Since the factory in Dandot fell within the territory of Pakistan on its constitution with effect from August 15, 1947, the appellant transferred the machinery which was meant for the Dandot factory (hereinafter referred as the Dandot machinery) to a new company known as Orissa Cement Ltd. some time in 1950-51, and charged only the invoice price which it had paid to M/s. F. L. Smidth and Co. The appellant thereafter asked for a higher price and afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or manufacture." The question in this case is whether the transaction was an "adventure" in the "nature of trade" within the meaning of the definition ? Some decisions have been rendered by this court on the point, and our attention has been invited to the decisions in Narain Swadeshi Weaving Mills v. Commissioner of Excess Profits Tax , Kishan Prasad and Co. Ltd. v. Commissioner of Income-tax, G. Venkataswami Naidu Co. v. Commissioner of Income-tax, Saroj Kumar Mazumdar v. Commissioner of Income-tax and Janki Ram Bahadur Ram v. Commissioner of Income-tax. Even so, no general principle can, for obvious reasons, be laid down to cover all cases of this kind because of their varied nature, so that each case has to be decided on the basis of its own facts and circumstances. It is, however, well-settled that even a single and isolated transaction can be held to be capable of failing within the definition if it bears clear indicia of trade (vide Narain Swadeshi Weaving Mills v. Commissioner of Excess Profits Tax , G. Venkataswami Naidu Co. v. Commissioner of Income-tax and Saroj Kumar Mazumdar v. Commissioner of Income-tax). It is equally well-settled that the fact that the transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ative insisted that a final decision might be taken at an early date so that the machinery which had to be shipped from abroad could be diverted, depending upon the decision, to the Calcutta or Bombay port. The appellant, thereafter, wrote a letter to M/s. F. L. Smidth and Co. (Bombay) Ltd. on September 9, 1948, directing that the plant meant for the Dandot works might be diverted to Orissa. It was specially stated in the letter as follows : "There are certain equipments in the specifications of the plants for extension Nos. 3 and 4, which were peculiar to the layout and design for the extension at Dandot and Shantinagar and they will not now fit in exactly in the same manner in our proposed new factories. As such, it is essential that the whole specifications are carefully scrutinised and manufacture of the items which are peculiar to the lay out of Dandot and Shantinagar Works only should be kept in abeyance in order to suit the local conditions." The plants were expected to arrive from March, 1949, onwards, but this would not have been possible without an import licence. The appellant obtained the licence from the Government of India and intimated to M/s. F.L. Smidth and C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... achinery ordered by the appellant was expected to start arriving in March, 1949, and could be diverted to Calcutta and that if the appellant's negotiations with the State Government were successful, the first lot of cement could be supplied by the beginning of 1950. (iii) The negotiations with the Orissa Government proved successful and the appellant wrote a letter to M/s. F.L. Smidth and Co. on August 2, 1948, informing it that it had obtained the permission of the Government of India, to import the Dandot machinery in India. The appellant also informed the suppliers on September 9, 1948, that it should divert the Dandot machinery to Orissa and supply the same according to the revised specifications to suit the local conditions. (iv) A formal agreement was executed by the appellant and the Orissa Government on December 23, 1948, for the setting up of a cement factory in Orissa. (v) The Dandot machinery arrived and was supplied by the appellant to the Orissa factory against cost price, which was debited to the Orissa Cement Company. It would thus appear that, long before the Dandot machinery was due, the appellant knew that it could not be used in Dandot. It has been fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... director addressed a letter to the Minister of Industries of the Orissa Government on April 7, 1950, stating that the Dandot machinery should be revalued and the appellant allowed a higher price due to the rise in its price at the time of the supply. The entire correspondence in that respect has not been placed on record by the appellant, but it appears that the appellant was able to secure a further sum of Rs. 7 lakhs, under an agreement dated December 4, 1951, in lieu of which it was able to secure 70,000 fully paid up shares of Rs. 10. The appellant succeeded in doing so merely because it was able to substantiate its claim for a higher price or profit, on the sole ground that it was entitled to it because of the increase in the price at the time of the sale. There is, therefore, nothing wrong in the view which has prevailed with the High Court that it was an adventure in the nature of trade. It has been argued by Mr. V. S. Desai for the appellant that as it was a single and isolated transaction of purchase and sale, the onus of proving that it was a transaction in the nature of trade lay on the department. This is a correct proposition of law and, as would appear from what h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al investment. It was, therefore, an after-thought to claim that the initial purchase was by way of an investment and was a capital asset. The facts of Kishan Prasad and Co. Ltd. v. Commissioner of Income-tax , Saroj Kumar Mazumdar v. Commissioner of Income-tax and Janki Ram Bahadur Ram v. Commissioner of Income-tax referred to by Mr. V. S. Desai were different. In the case of Kishan Prasad and Co. Ltd. there was an agreement to give the managing agency to the assessee on the erection of the mill because it had subscribed to shares worth Rs. 2 lakhs. The mill was not erected and the assessee sold the shares. There was, therefore, justification for holding that the purchase of the shares was an investment to acquire the managing agency and was not an adventure in the nature of trade. In Saroj Kumar Mazumdar's case there was a single transaction of sale of rights for the purchase of land measuring 3/4 acre. by the assessee who was an engineer by profession. His construction activities declined and that was why he sold his rights in the land for Rs. 74,000 odd in excess of the amount paid by him. The income-tax department, however, failed to prove that the assessee's dominant inten ..... 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