9911796707
TMI Blog1963 (3) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... gotiating with Messrs. Harseman Brothers, proprietors of Swadeshi Cotton Mills, for acquiring the controlling interest in the said mills. In or about April, 1946, Messrs. Mangturam Jaipuria acting through its main partner, Anandram Guzdar, was also trying to acquire the controlling interest in the said Swadeshi Cotton Mills with a view to secure the controlling interest for itself. Messrs. Mangturam Jaipuria offered to pay ₹ 6,00,000 to the applicant, Mitchell, and Hodge, in order to dissuade them from competing with it in the negotiations for the purchase of the controlling interests in the Swadeshi Cotton Mills. The offer was made by Messrs. Mangturam Jaipuria as contained in their letter dated 29th April, 1946, addressed to David Mitchell and the material portion of that letter is : ....We confirm that we and our associates are desirous of purchasing the same (Swadeshi Cotton Mills Co. Ltd.) and in the event of your securing the same for us and upon your giving up all claims to purchase the same and assigning to us and our associates any interest that you may have acquired therein, we hereby agree to pay you and your colleagues a capital sum of ₹ 6,00,000, such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rought on record before he could express his opinion and, therefore, remanded the case to the Appellate Assistant Commissioner with a direction to examine certain persons and to submit his remand report. The President made the remand order on the 24th December, 1955. After remand the Appellate Assistant Commissioner examined certain persons and made his remand report to the President. It may only be added that the Accountant Member was of the view that the receipt was of a casual and non-recurring nature and that it had not arisen out of the appellant-assessee's business and, therefore, it was exempt from tax under section 4(3)(vii) of the Income-tax Act. The Judicial Member, on the other hand, held that the assessee was a professional broker and the assessee in the first instance showed the amount in his brokerage account and also showed it as profit in the first return filed by the assessee. The Judicial Member held that the money received by these three professional persons was in the course of their joint venture in consideration of their not competing with the rival group and could not be considered to be casual within the meaning of section 4(3)(vii) of the Act. After ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee had produced no document or material in writing and in fact there is no evidence of the senior partner, Ram Kumar Agarwalla, to show that the assessee in fact ever wanted to buy the mills. These facts and circumstances are, in our view, enough materials to support the finding of the President that the assessee had no intention to buy the mills. Before leaving this question it is necessary to remark that the question is not really material. On the contrary, if the assessee's contention is that the assessee had the intention to buy the mills then it becomes more difficult for the assessee to contend that it was not a part of the assessee's business and in that event the income arising out of it would be taxable income, a conclusion which will prejudice the assessee's main contention in this reference and which is the second question asked. The second question is the main question in this reference. The question is whether the receipt is a revenue receipt from a venture in the nature of trade and liable to tax. On a consideration of the facts on record we are satisfied that the President's finding on this question that it is a revenue receipt from a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dge, accepted the offer made by the Jaipurias and received the money in the course of their joint venture in consideration of their not competing with the rival group. The assessee was called upon to produce the correspondence but none was produced. The non-production of the correspondence by the assessee is significant. It also appears on record that the assessee had, at the end of 1946, acquired the controlling interest of another company, namely, Christian Mica Co. Ltd. Obviously, then, it was a part of the assessee's business to go in for such ventures. That in the case of Mica Co. the assessee did ultimately acquire the controlling interests while in the case of the Swadeshi Cotton Mills under the present reference the assessee did not, cannot be used as proving that the attempted purchase of controlling interests in the Swadeshi Cotton Mills was outside the business purview of the assessee. The fact is that the assessee made a business of it although the assessee and his two associates did not ultimately in fact purchase the controlling interest in this Swadeshi Cotton Mills. Their chance and likelihood of getting that interest was bought off by the price paid by the Jaip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regular offer, bargaining and acceptance as will be clear from the letter of offer from the Jaipurias quoted above and the subsequent acts and conduct of the assessee ultimately in receiving this sum of ₹ 2,00,000 out of ₹ 6,00,000. It is needless for us to reiterate that the definition of business in section 2(4) of the Income-tax Act is not an exhaustive definition but it is an inclusive one in the widest possible terms as including any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture . On the facts found in this reference and as indicated by us above we have no hesitation in holding that it is an adventure in the nature of trade and it cannot be in this context anything else. Mr. Banerjee took, in our opinion, unnecessarily long time by his citation of cases which we consider mostly irrelevant. We do not, therefore, propose to discuss irrelevant authorities. We shall therefore select some of the more relevant and salient decisions on this point under reference. A Division Bench of this court (Derbyshire C.J. and Panckridge J.) in In re Susil C. Sen [1941] 9 ITR 261 discussed a claim for exemption for the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ills was a kind of a restrictive or negative covenant and was therefore a kind of compensation in the nature of capital. We do not consider that there is any substance in this contention. There is no covenant to restrict in this case. One group tried to purchase a mill and another rival group appeared on the scene to purchase it. One rival buys off another rival and acquires the interest in the mill. The business is complete. There is no question of any restrictive covenant. Restrictive covenant means that the use of a property or a right is restricted after its purchase or acquisition. Nothing is restricted in the present case. The assessee was not restricted generally not to compete with the Jaipurias to acquire any interest in other companies and mills. The particular interest in the particular mill which the assessee and his associates wanted to purchase was warded off by paying them a price. The assessee was always free and remained free to exercise his business of acquiring interest in other companies and in fact he did in the Christian Mining Company as stated before. A restrictive or negative covenant is always a part of the subject-matter of the contract or deal and cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rade receipt, the amount so paid is, prima facie, a revenue trade receipt, and a receipt in the period in which the agreement for payment is made. The circumstances may show, however, that a particular receipt was not a receipt of the trade. In support of that proposition a number of cases are cited out of which we shall pick out only three or four major ones which can be said to have at least some resemblance with the facts of the present reference before us. In Vaughan v. Archie Parnell Alfred Zeitlin Ltd. [1940] 23 Tax Cas. 505 the respondent company carried on the business of theatrical agents and producers of plays. Under an agreement it purchased for 1,000 the production of a play for a period of five years on payment of a royalty based on gross weekly receipts and a further royalty based on the net profits on each tour of the play, on account of which a sum of 2,500 (no part of which was to be returnable in any event) was to be paid before taking delivery of the production. The agreement provided that no film of the play should be made or done in the territory over which the licence extended. The respondent company accordingly commenced an action against the licenso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s seem to me to be trade receipts, just the same as if, in order to get a contract for the supply of chlorine, they had entered into some collateral bargain, under which they incurred expense. Here they are getting their chlorine on terms under which with one hand they give away their covenant, and with the other at the same time they get these payments. That appears to me to stamp them with the character of trade receipts, and, in my opinion, the assessment was rightly made.... It will be unnecessary to multiply decisions and authorities. Most of the cases to which reference was made by Mr. Banerjee for the assessee on the question of adventure in the nature of trade have already been discussed and distinguished in a recent decision of the Division Bench of this court in Mayfair Estates Private Ltd. v. Commissioner of Income-tax [1963] 48 ITR 217 including the leading decision of our Supreme Court in Saroj Kumar Mazumdar v. Commissioner of Income-tax [1959] 37 ITR 242 ; [1959] Supp. 2 SCR 846 and G. Venkataswami Naidu Co. v. Commissioner of Income-tax [1959] 35 ITR 594 ; [1959] Supp. 1 SCR 646. Mr. Banerjee, for the assessee, seeing these difficulties on his way, finally ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
