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TMI Blog1988 (4) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... other questions to us. The assessee is a private limited company. It was incorporated in June, 1967. The objects of the company were to carry on business of engineering and building contractors besides manufacturing of mosaic and other types of tiles and other building materials. The objects also included buying, selling manufacturing, repairing and letting out on hire and dealing in all plants, machineries, appliances and things capable of being used in any, business. At the nascent stage, the company thought of manufacturing mosaic tiles. The preliminaries in this behalf, however, took some time. While the blueprints and preliminaries were going on to start the tile factory, the assessee purchased a bulldozer for rupees two lakhs during the accounting year ended on June 30, 1969. The bulldozer was acquired after taking loan from various financing institutions. After purchasing it, it was let out to M/s. Hyderabad Investment Trust Ltd., Hyderabad, on a monthly hire charge of Rs. 12,000. This hiring was for six months only. The sum, of Rs. 72,000 received by the assessee is the bone of contention in these references. The Income-tax Officer accepted the stand of the assessee that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded that the Tribunal had erred in holding that the hiring of the bulldozer was not an adventure in the nature of trade. The entire controversy veers round the expression " adventure in the nature of trade ". Section 14 lays down the heads of income chargeable to income-tax. It provides that all income, for the purposes of charging income-tax and computation of total income, shall be classified under various heads in six categories. Category D is profits and gains of business or profession ". The expression " business in ordinary parlance means any trading activity accompanied by regularity of transactions intended for the purpose of making profit. The word "business" has been used from time to time with varying connotation. It means the state of being busily engaged in anything; that about which one is busy; function, occupation; stated occupation, profession or trade ; trade, commercial transactions or engagements (see the Shorter Oxford English Dictionary, 2nd edition, page 239). In general, a single transaction is not taken as business. The expression "business ", however, has been given an extended meaning in the Incometax Act. It has been stated in section 2(13) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of view to find out whether the letting was the doing of a business or the exploitation of his property by an owner. " In the case of G. Ventkataswami Naidu Co. v. CIT [1959] 35 ITR 594, the Supreme Court observed at page 610: "We thus come back to the same position and that is that the decision about the character of a transaction in the context cannot be based solely on the application of any abstract rule, principle or test and must in every case depend upon all the relevant facts and circumstances." The facts in the case of G. Venkataswami Naidu Co. [1959] 35 ITR 594 (SC) were that the assessee-firm, as managing agent, acquired land by purchase. After a year of the purchase, the firm sold the lands to company, Janardana Mill Ltd., Coimbatore, of which the assessee was the managing agent. The sale brought about a profit of Rs. 43,887. On those facts, peculiar to that case, the Tribunal found that the excess of sale price over the purchase price was not a capital accretion but was gain in an adventure in the nature of business and was, therefore, taxable. The point in controversy in that case was somewhat different from the one before us in the sense that in that case the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isky in bond for 407 pounds. Nearly three years thereafter, the whisky was sold at a profit of 1,131 pounds. That was the assessee's sole dealing in whisky. He had no special knowledge of the trade and he did not take delivery of the whisky nor did he have it blended and advertised. Even so, it was held that the transaction was an adventure in the nature of trade. On the facts of that case, it was held that the single transaction was an adventure in the nature of trade. Another decision of the Supreme Court in P. M. Mohammed Meerakhan v. CIT [1969] 73 ITR 735 may also be usefully referred to. Here again, the assessee had acquired a large chunk of land. After plotting it, he sold the greater part thereof retaining some for himself. The transaction brought in some profit. This was once again a solitary transaction of purchase of landed property culminating in profit to the assessee. The Revenue contended that the profit was income from an adventure in the nature of trade. Ramaswami J., relying upon the cases of Martin v. Lowry [1926] 11 TC 297 (HL), Rutledge v. Commissioners of Inland Revenue [1929] 14 TC 490 and Commissioners of Inland Revenue v. Fraser [1942] 24 TC 498, held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Hyderabad Investment Trust Ltd. on a monthly rental of Rs. 12,000. The bulldozer was ultimately sold during the assessment year 1972-73. The company thus earned some income from the leasing out of the bulldozer. It is true that the purchase of the bulldozer had nothing to do with the manufacture of tiles but so was the situation in the case of IRC v. Fraser [1942] 24 TC 498 where a wood-cutter bought and sold whisky and earned profit thereon. The assessee, wood-cutter, neither had the knowledge of the trade nor did he have it blended and advertised, yet it was held that the income from sale of whisky was an adventure in the nature of trade. The company had been floated to earn profit. While the tiles factory could become critical, the company decided to make the best use possible of its resources instead of keeping it as a dead asset. It, therefore, purchased a bulldozer and leased it out. The idea obviously was to earn some profit out of the funds at their disposal. There was no idea of retaining the bulldozer for an indefinite period. If the facts showed that the idea was to retain it for indefinite duration, the acquisition of the bulldozer could not have been capital accreti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat point of time. Their Lordships of the Supreme Court observed as follows at page 459: "We are therefore of the opinion that it was a part of the normal activities of the assessee's business to earn money by making use of its machinery by either employing it in its own manufacturing concern or temporarily letting it to others for making profit for that business when for the time being it could not itself run it. " The expanse of Shri Lakshmi Silk Mills Limited case [1951] 20 ITR 451 (SC) was explained by the Supreme Court itself in Narain Swadeshi Weaving Mills v. CEPT [1954] 26 ITR 765 (SC) in the following words (p. 773): "It should be noted that in that case the respondent company was continuing its business of manufacturing silk cloth. Only a part of its business, namely, that of dyeing silk yarn, had to be temporarily stopped owing to the difficulty in obtaining silk yarn on account of the war. " It was explained once again in the case of New Savan Sugar and Gur Refitting Company Limited case [1969] 74 ITR 7 (SC), where the Supreme Court observed that in the case of Lakshmi Silk Mills Ltd. [1951] 20 ITR 451 (SC), only a part of the machinery was let out on lease and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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