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TMI Blog1981 (5) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... bscribed capital which was all paid up, amounted to Rs. 3 1/2 crores in the form of 35 lakhs shares of the face value of Rs. 10 each. Another company in the name of Dalmia Jain Aviation Ltd. was incorporated as public limited company on March 11, 1948. It was converted into a private Ltd. company on April 26, 1952. One of the shareholders of the Dalmia Jain Airways Ltd. filed a petition under s. 162 of the Indian Companies Act, 1913, for the compulsory winding up of that company. However, after the petition was filed the company went into voluntary liquidation in pursuance of a special resolution passed on June 13, 1952. On November 16, 1952, five shareholders of Dalmia Jain Airways Ltd. wrote to the voluntary liquidator, that on negotiations carried on by them with Dalmia Jain Airways Ltd., the latter company had agreed to take over the entire existing assets and liabilities of Dalmia Jain Airways Ltd., provided the draft scheme, which was enclosed with the letter, was sanctioned by the court. On December 3, 1952, the voluntary liquidator filed Miscellaneous Case No. 941 of 1952 in the Court of the District judge, Delhi, proposing a scheme of arrangement under ss. 153 and 153A of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company on the transferee-company in the manner prescribed in para. 9 hereinafter. 4. The transferee-company shall, in addition to the payment described in the preceding paragraph, undertake to pay the following amounts to all the members of the transferor-company (except those specified in para. 6 hereinafter) in full and final settlement of all their rights and interests in the transferor-company as contributories: (a) three yearly instalments of annas 0-12-0 each, first instalment being payable one year after the payment of Re. 1 per share as provided in paragraph 3 above. (b) seven yearly instalments of Re. 1 each, first instalment being payable one year after the last instalment under (a) above. The transferee-company shall issue deposit receipts or other suitable documents in favour of each member or his nominee giving the total amount payable to them and the conditions attaching thereto as set out in the scheme, 5. Each member of the transferor-company in lieu of payment of Rs. 10-4-0 by instalments as described in paragraphs 3 and 4 above, may, in his discretion, agree to accept: (a) a cash payment of Rs. 5-4-0 per share to be paid within two weeks of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. According to para. 9 of the scheme, any member who wished to avail of his right under the scheme, had to give notice of his address and surrender his share scrips to the transferee-company within a period of six months from the date of publication of the notice, that is to say, before August 20, 1953. However, in the meantime, the name of the transferee-company was changed on July 25, 1953, to Asia Udyog (P.) Ltd. A few months thereafter, that is to say, on March 24, 1953, an agreement was entered into by the assessee with Asia Udyog Pvt. Ltd. The preamble to the agreement recited, inter alia, that the assessee, at the request of the transferee-company, had given the guarantee to the members of Dalmia Jain Airways Ltd. and that it was also agreed among the transferee-company and the guarantor that after the expiry of five years from the date of the passing of the said scheme by the court, i. e., February 10, 1953, whatever amount shall remain to be paid to the members of the transferor-company in accordance with the terms of the said scheme, the transferee-company would transfer that liability to the guarantor within one year after the expiry of the aforesaid five years, at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o you appears to be pre-planned with a view to make profits (vide your agreement dated March 24, 1958, with Asia Udyog, Pvt. Ltd.). Please show cause why the difference between the actual liability in respect of the shareholders of Dalmia Jain Airways Ltd. and Rs. 67,00,000 should not be assessed as your income during this year." On receipt of the aforesaid notice the assessee filed copies of Dalmia Jain Airways Ltd. shareholders' accounts for the years up to September 30, 1964, and also from October 1, 1964 to January 31, 1965, as required. The assessee also submitted a statement prepared by M/s. Asia Udyog Pvt. Ltd. showing how the shareholders' liability was determined by them on the date of transfer of the same to him. The statement filed by the assessee showed that on October 1, 1958, there were 4,72,549 shares unsurrendered and that the value of these shares were calculated at Rs. 10-4-0 per share which amounted to Rs. 48,43,625 against the face value of Rs. 47,25,490. The ITO was of the view that nothing was payable under the scheme in respect of the said unsurrendered shares because of the non-compliance with cl. 9 of the scheme. The ITO was further of the view that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'Business' includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture." In G. Venkataswami Naidu Co. v. CIT [1959] 35 ITR 594 (SC), the assessee-firm which was acting as managing agents purchased for total consideration of Rs. 8,713 four contiguous plots of land adjacent to the place where the mills of the company managed by it were situated. The four purchases were made on different dates. The assessee-company made no efforts to cultivate the said land or erect any superstructure on them but allowed them to remain unutilised except for the rent received from the house which existed on one of the plots. The assessee sold those lands to the managed company and the question arose whether the sum of Rs. 43,887, being the excess realised by the assessee on the two sales over its purchase price, was assessable to income-tax. The Appellate Tribunal rejected the contentions of the assessee that the properties were bought as an investment and that the plots were acquired for building tenements for the labourers of the mills as well as the alternative contention that the managed company desired to purchase the plots on account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation ". The next contention of the learned counsel for the petitioner was that the transaction could not be said to be an adventure in the nature of trade because it was not connected with the trade of the assessee and was an isolated transaction. He contended that the receipt should have been taken as casual and non-recurring. When s. 2(4) of the Indian I.T. Act, 1922, refers to an adventure in the nature of trade, it clearly suggests that the transaction in question cannot properly be regarded as a trade or business. It is allied to transactions that constitute trade or business but may not be a trade or business by itself; I It is characterised by some of the essential features that make up a trade or business, but not by all of them, and so even an isolated transaction can satisfy the description of an adventure in the nature of trade provided at least some of the essential features of the trade are present in the isolated or single transaction. To determine the nature of the transaction the dominant intention of the assessee has to be seen. If the intention is to embark on a venture in the nature of trade as distinguished from a capital investment it would make no differenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harwal V. CIT [1973] 101 ITR 439 (Mad), the assessee, a pawn-broker, obtained an assignment of a decree for Rs. 8,000 for a consideration of Rs. 4,000. Thereafter he purchased the house property from the judgment-debtor for a consideration of Rs. 21,500 and adjusted the sum of Rs. 8,000 due under the decree in part payment of the consideration for the sale. The ITO assessed the profit of Rs. 4,000 made by the assessee in the transaction relating to the assignment of the decree as business profit. This was confirmed by the AAC and the Tribunal. On a reference to the High Court of Madras, the High Court held that the absence of any prior or subsequent dealings of any Purchase of decree by the assessee bad no significance because, even first venture could be an adventure in the nature of trade. In Surangmali Punamchand Surana v. CIT [1960] 40 ITR 360 (Assam), the assessee which carried on business in potatoes, oilcakes, etc., and commission agency business, had borrowed large amounts from a bank on an overdraft account. When in May, 1948, the bank suspended operation and applied for scheme of arrangement the amount outstanding on this account was Rs. 35,912. The assessee obtained a co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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