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PETITIONER: SAROJ KUMAR MAZUMDAR

       Vs.

RESPONDENT: THE COMMISSIONER OF INCOME-TAX, WESTBENGAL, CALCUTTA.

DATE OF JUDGMENT: 04/05/1959

BENCH: SINHA, BHUVNESHWAR P. BENCH: SINHA, BHUVNESHWAR P. BHAGWATI, NATWARLAL H. KAPUR, J.L.

CITATION:  1959 AIR 1252            1959 SCR  Supl. (2) 846

ACT: Incometax-Assessment-Single transaction of Purchase and sale of  land-If  a  venture in the nature of  trade  or  capital investment  -Test-Dominant intention-Onus-Indian  Income-tax Act, 1922 (XI Of 1922), SS. 2(4), 1O.

HEADNOTE: The  question  for  decision in this appeal  was  whether  a single  transaction  of sale of land measuring  about  three quarters of an acre was an adventure in the nature of  trade so  as  to  make  it liable  to  income-tax.   The  assessee appellant, an Engineer by profession, was engaged in various business  activities including that of an  engineering  firm but, admittedly, had no dealing, except the one in question, in  respect of land.  In 1946 be entered into  an  agreement with the Hindusthan Co-operative Insurance Society Ltd.  for the  purchase of the land in question and paid a sum of  Rs. 32,748 in two instalments, being 25% of the estimated  total price of the land.  As his construction activities  declined and the Government, who had requisitioned the land, were not immediately  releasing  it, the appellant  sold  his  rights under  the  agreement to a third party in 1947  and  thereby received  a  sum of Rs. 74,000 odd in excess of  the  amount paid  by  him to the Society.  The land,  however,  was  not released  by  the  Government until  1949.   The  Income-tax Officer  held that the transaction was an adventure  in  the nature  of  trade and the said sum was a  profit  therefrom, taxable under s. 10 of the Incometax Act, and included it in the    assessable   income.    The    Appellate    Assistant Commissioner,  in appeal, held that the assessee, a  man  of means,  had intended to purchase the land for his  own  use, and  that the motive of profit was entirely absent when  the purchase was made and that as it was a case of  appreciation of  capital,  he was liable to pay Capital Gains  tax.   The Appellate Tribunal on appeal by the Department, reversed the findings  and  the  decision  of  the  Appellate   Assistant Commissioner  and affirmed that of the  Income-tax  Officer. After  the  assessee had obtained from  this  Court  special leave  to appeal, he made an application to the  High  Court under  s.  66(2)  of the Income-tax Act,  which  that  Court dismissed as being barred by limitation.

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Held,  (per Bhagwati and Sinha, JJ., Kapur, J.,  dissenting) that  admittedly the transaction in question being a  single instance of its kind, and not in the line of the business of the  assessee, it was for the Department to prove  that  the dominant  intention of the appellant, when he  entered  into the  agreement with the Society, was to embark on a  venture in the nature of 847 trade  as distinguished from a capital investment, and  they having failed to do so, the appeal must succeed. Commissioners  of Inland Revenue v. Reinhold, 34 T. C.  389, applied. There  could  be no doubt, as held by the  Court,  that  the question for decision involved in such cases was one of  law or a mixed question of fact and law. G.   Venkataswami  Naidu  and Co. v. The Commissioner  of  I come-tax,   A.I.R.   1959   S.C.  359,   referred   to   and distinguished. The line of demarcation, however, between an isolated trans- action  and a venture in the nature of trade was  very  thin and each case had to be decided on the total impression  all its facts and circumstances made on the mind of the judge. Case-law reviewed. KAPUR,  J.--Even though the powers of this Court under  Art. I36  of  the  Constitution were very wide, they  had  to  be exercised within the limits imposed by its own decisions and one such limitation was that this Court would not ordinarily interfere on questions of fact.  Since the question involved in  the instant case was a mixed question of law  and  fact, the  facts  should  properly  be found  by  the  body  whose exclusive function under the Income-tax Act was to do so. G.   Venkataswami Naidu & Co. v. The Commissioner of Income- tax, A.I.R. 1959 S.C. 359 and Dhakeswari Cotton Mills v. The Commissioner  of Income-tax, [1955] i S.C.R.  94I,  referred to. Nor  could an assessee be allowed to by-pass  the  procedure prescribed by ss. 66(1), 66(2) of the Income-tax Act to have question of law determined. Since,  however, the Appellate Tribunal had, in the  instant case,  failed to consider certain essential facts, the  case should be remitted to it for a proper decision in the  light of the observations made by this Court.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 347 of 1955. Appeal  by special leave from the judgment and  order  dated March  26,  1954,  of  the  Income-tax  Appellate  Tribunal, Calcutta, in Income-tax Appeal No. 5263 of 1953-54. A.   V.  Viswanatha  Sastri  and  Sukumar  Chosh,  for   the appellant. G.   K. Daphtary, Solicitor-General of India, B.  Ganapathy, R. H. Dhebar and D. Gupta, for the respondent. 1959.  May 4.  The Judgment of Bhagwati and Sinha, JJ.,  was delivered  by  Sinha,  J. Kapur,  J.  delivered  a  separate Judgment. 848 SINHA, J.-The only question for determination in this appeal by  special  leave, is whether the solitary  transaction  in respect  of about three quarters of an acre of land  in  the suburbs of Calcutta, was an adventure in the nature of trade and,  therefore, liable to income-tax.  The assessee is  the appellant.   He challenges the correctness of the  order  of the Income-tax Appellate Tribunal, Calcutta Bench, Calcutta,

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dated  March 26, 1954, passed in I.T.A. 5263 of 1953-54,  in respect  of the Assessment year 1948-49, reversing  that  of the Appellate Assistant Commissioner of Incometax, Range " C ", Calcutta, dated September 5, 1953. The  facts  of  this case leading upto this  appeal  are  as follows:  The  appellant  is engaged  in  various  types  of business  activities, being a share-holder and  Director  or Managing Director of several limited liability concerns, and is also a partner in the firm known as " Pioneer Engineering Works  ". In respect of his income during the  previous  two assessment  years, the appellant was assessed to  income-tax on the sums of Rs. 53,000/-(1946-47) and Rs. 59,000/- (1947- 48).  The appellant holds investments in shares of the value of Rs. 2,45,000/-, out of which, according to the  assessee, shares  of the value of Rs. 1,95,000/-, though  standing  in his  name, belong to other members of his family,  including his father and his wife. The  Hindusthan Co-operative Insurance Society  Limited,  of Calcutta,  (hereinafter  referred to as "  the  Society  "), acquired  a block of about 578 bighas of land lying  between Diamond   Harbour  Road  and  Tolly’s  Nullah,  within   the Municipal limits of the Corporation of Calcutta, between the years 1940 and 1942.  The Society decided to level the  land thus acquired and to open out roads and after developing the same,  it  subdivided  it  into small  plots  and  sites  in different blocks suitable for residential purposes under its scheme called " The New Alipore Land Development Scheme  No. XV  ". The Society offered such plots for sale.   One  -such plot,  being plot No. 77 in block " E " of the said  Scheme, was  agreed, by an agreement dated January 10, 1946,  to  be sold  to the assessee at the rate of Rs. 2,550/- per  katha. In pursuance of the said agreement, the assessee paid to the Society, a sum of 849 Rs.  13,099/- being 10% of the estimated price of  the  plot with  an approximate area of 51 kathas, which  subsequently, on  exact  measurement,  was  found  to  be  45-56   kathas. Subsequently, on the acceptance of his offer, the  appellant paid  another SUM of Rs. 19,649 (omitting annas), being  15% of the estimated price.  Thus, in all, a sum of Rs. 32,748/- being 25% of the estimated total price of the land, was paid by  the  assessee to the Society.  All this area  which  the Society  had  undertaken to develop and  sell  to  different purchasers  in  small  plots,  was  in  occupation  of   the Government,   which  had  requisitioned  it   for   purposes connected  with  the prosecution of the  Second  World  War. Hence,  one  of  the terms of the  transaction  between  the assesee  and  the  Society,  was  that  the  transaction  of purchase  would be completed within six months of the  lands being  released from Government occupation.  It was  further stipulated  that  the assessee would be entitled  to  apply, within  three  months of the receipt of the  notice  of  de- requisition,  for extension of time not exceeding one  year, for the completion of the transaction on the condition  that he  paid  interest  at  the rate of  7%  per  annum  on  the outstanding  amount,  during the extended  period.   If  the assessee,  as  purchaser, paid to the  Society  another  sum which,  together  with  Rs. 32,748/-,  already  paid,  would amount  to  50% of the total price of the plot  in  question (within  six  months of the notice  of  de-requisition),  he could  get a conveyance of the property on his executing  an English Mortgage for the remaining 50% of the price carrying interest at the rate of 7%, on the expiry of these aforesaid six   months.   As  there  was  an  apprehension  that   the Government  might  acquire the whole property  for  its  own

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purpose, it was further stipulated that in the event of such an  acquisition by Government, the agreement for sale  would stand  rescinded, and the assessee, in that event, would  be entitled  to  re-payment of the amounts paid by him  to  the Society  by  way  of  advance  for  the  completion  of  the transaction.   The assessee’s case is that as the  terms  of the  payment  of purchase-price in several  instalments,  as aforesaid, were convenient to him, 107 850 he agreed to take the plot on the conditions aforesaid, with a  view  to  building a residential house  for  himself  and constructing  a  workshop in connection  with  his  business activity.   At  the  end  of  the  Second  World   War,  the assesee’s  construction  activities began  to  decline,  and there  was  no immediate prospect of the  land  in  question being    de-requisitioned   by   Government.     In    those circumstances, the assessee negotiated for the assignment of his  rights  under the agreement with the Society,  to  Rani Yuddha Rajya Devi of Nepal.  The Rani appeared to have taken a fancy to the plot and to have made an attractive offer  to the appellant.  Hence, after exchange of letters between the parties,  it  was  agreed between them that  a  sum  of  Rs. 1,07,000  odd  would  be  deposited by  the  Rani  with  the assessee  on suspense account until the transaction of  sale between  the  Society  as the vendor and  the  Rani  or  her nominee,   as  the  vendee,  would  be  executed   and   the transaction  of purchase finalised upon her  undertaking  to pay the sum of Rs. 98,000 odd to the Society, which was  the outstanding amount of the sale-price in respect of the  plot agreed  by  the  assessee to be purchased by  him  from  the Society.   After a good deal of correspondence, on  December 27,  1950,  the  Society executed a deed  of  conveyance  in respect  of the said plot, to the daughter of the said  Rani as  the  vendee.  The aforesaid vendee executed  a  deed  of mortgage in favour of the Society for the outstanding amount of  Rs.  50,900/-, after payment of Rs. 32,700  odd  to  the Society.  In the result, the assessee received, on April  3, 1947, a sum of Rs. 1,07,000 odd from the Rani, in  pursuance of  the agreement between her and the assessee.   Until  the execution  of  the  sale-deed between the  Society  and  the Rani’s  nominee, as aforesaid, the assessee continued to  be liable to the Society in respect of the agreement of January 10, 1946.  The assessee, thus, received from the Rani a  sum of Rs. 74,000 odd in excess of the amount paid by him to the Society.  The property, including the plot in question,  was not de-requisitioned until some time in 1949. In  respect  of the assessment year  1948-49,  the  assessee filed a return of his income to the Income-tax 851 Department,  showing  a  loss  of  Rs.  2,000  odd  for  the financial year 1947-48.  In pursuance of the notice under s. 23(2)  of the Income-tax Act, the assessee  appeared  before the Income-tax Officer, Calcutta, and produced all his books of  account, including his bank   accounts.   The Income-tax Officer,  on  an  examination of  the  accounts,  and  after questioning  the assessee, came to the conclusion  that  the assessee  had  made  a profit of Rs.  74,000  odd  from  the transaction  in -question, which, according to him,  was  an adventure in the nature of trade.  Hence, on an  examination of the assessee’s accounts, the Income-tax Officer  included the sum of Rs. 74,485/- as profit from an " adventure in the nature of trade "-taxable under s. 10 of the Income-tax Act- as one of the items of income accrued to the assessee during the assessment year 1948-49.

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The  assessee went up in appeal to the  Appellate  Assistant Commissioner of Income-tax, and challenged the conclusion of the  Income-tax Officer that the sum of Rs. 74,000  odd  was profit  from  an adventure in the nature of trade.   It  was also  taken as one of the grounds of appeal by him  that  in any event, the receipt accrued to the assessee only in 1950, after the transaction of sale had been completed as  between the Rani’s nominee and the Society.  The Appellate Assistant Commissioner did not agree with the Income-tax Officer  that the  assessee was not in a position either to  complete  the transaction  of  purchase  by  paying  the  full  amount  of consideration, or to erect a building thereon, or to use the land  in  any  other way.  He pointed  out  that  under  the Scheme,  the  Society  had  offered  terms  of  purchase  on instalments and on execution of a mortgage in respect of the vended  property to the extent of 50% of  the  consideration money.    He  also  pointed  out  that  the   assessee   bad considerable investments to the extent of Rs. 2,45,000/-  in shares  of different limited concerns.  He, therefore,  came to the conclusion that the assessee was a man of means,  and that  it  could  not be said that he  had  not  intended  to purchase the plot for his own use.  He further hold that the motive  of making a profit at the time of the purchase,  had not been established by the Department, 852 and  that  it  was  a " solitary  transaction  ".  On  these findings, he found himself unable to confirm the finding  of the Income-tax Officer that the profit was from an adventure in the nature of trade.  He took the view that the appellant had made an investment which had appreciated considerably in value, and that it was undoubtedly a case of appreciation of capital.  Treating it as a " Capital Gain ", he came to  the conclusion  that as the payment bad been made in  1947,  the gain  accrued  in  that year and not in the  year  1950,  as contended on behalf of the assessee.  In the result, he made him liable to pay Capital Gains tax. The Department went up in appeal to the Incometax  Appellate Tribunal,  which,  by  its judgment dated  March  26,  1954, allowed  the  appeal.   The Tribunal pointed  out  that  the assessee  was not a man of such large means as to  think  of acquiring  the  plot  for his own  residential  or  business purposes.  The admitted shares worth Rs. 2,45,000/- standing in  his  name, the Tribunal pointed out, were  held  by  the assessee,  in  respect of the major portion,  on  behalf  of other  members  of his family.  The Tribunal  also  observed that  Rs. 32,748/- paid by the assessee to the  Society  had been  paid out of borrowed money.  This conclusion does  not appear  to have been well-founded in fact.  The accounts  do show  credits in favour of the assessee of a larger  amount. The  Tribunal  also  pointed  out  that  undoubtedly  the  " assessee  is a keen businessman and has a number  of  varied business interests.  Admittedly, he is a director of about a dozen  concerns and managing director of two or three.   Her is  -/8/- annas partner in an Engineering concern  which  is carrying  out  a number of construction and  other  contract works.   He is an Engineer by profession and a  resident  of Calcutta."  The Tribunal based its conclusion that the  sale was  an  adventure  in the nature of  trade,  and  that  the profits,  thus made, were assessable to income-tax,  on  the following grounds:--- That  the  payment  by the assessee  to  the  Co.  operative Society,  of Rs. 32,748/-, came out of a loan taken for  the purpose  from  a  company (which conclu.  sion,  as  already pointed out, is not borne out by the entries in the books of account of that company);

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853 2.   That  the assessee could not have paid the  balance  of Rs.  98,000  odd, the outstanding amount  of  the  purchase- money, to the Insurance Company ; 3.   That the assessee had no means to construct a house  on the land, and lastly, 4.   That  the site itself fetched no income, thus,  showing that  it  could not be an investment but only  an  excursion into the realm of trade. Against  this  decision  of  the  Appellate  Tribunal,   the assessee  moved  this Court and obtained  special  leave  to appeal. Before we deal with the main question in controversy in this appeal,  we would like to make some general remarks  on  the nature  of the questions involved in this case.  It  is  not disputed  on behalf of the respondent that the question  now before us, is a question of law, or a mixed question of fact and law, as has been recently laid down by this Court in the case of G. Venkataswami Naidu and Co. v. The Commissioner of Income-tax (1).  Speaking for the Court, Gajendragadkar, J., after  a detailed discussion of the decisions of this  Court Meenakshi  Mills, Madurai v. Commis. sioner  of  Income-tax, Madras  (2)  and  The  Oriental  Investment  Co.,,  Ltd.  v. Commissioner of Income-tax, Bombay (3), and of the House  of Lords,  in Edwards v. Bairstow (4), came to  the  conclusion that  the question arising in the case, is a mixed  question of law and fact, and, therefore, open to examination by this Court.  In G. Venkataswami Naidu and Co. v. The Commissioner of  Income-tax  (supra), the question  raised,  was  exactly similar to the question now before us, though in a different setting  of facts.  His conclusion may be stated in his  own words as follows:- "  In  other  words, in reaching  the  conclusion  that  the transaction  is  an adventure in the nature  of  trade,  the tribunal  has  to find primary evidentiary  facts  and  then apply  the  legal principles involved in  the  expression  " adventure in the nature of trade " used by s. 2, sub-s. (4). It  is  patent  that the clause ’in  the  nature  of  trade’ postulates the existence of certain elements in (1)  A.I.R. 1959 S.C. 359. (2)  [1956] S.C.R. 691 (3)  [1958] S.C.R. 49. (4)  36 T.C. 207. 854 the  adventure  which  in  law  would  invest  it  with  the character  of a trade or business;. and that would make  the question and its decision one of mixed law and fact." "In that view of the matter, this Court further pointed  out that  the more proper form of the question is " whether,  on the  facts  and  circumstances  proved  in  the  case,   the inference  that the transaction in question is an  adventure in  the  nature of trade is in law  justified."  The  recent decision of this Court has examined almost all the  relevant cases  decided in Indian as also English and Scotch  Courts, and  thus, our task in the present case, has been very  much simplified.  It has further been observed in that case, more than  once,  that  judicial opinion was  unanimous  that  no general  principles or universal tests could be  laid  down, which  could govern the decision of all cases in  which  the question for determination is similar to the one now  before us.   Each case must be determined on the  total  impression created  on  the  mind of the Court by  all  the  facts  and circumstances disclosed in that particular case.  Hence,  no decided  case can, strictly speaking, be a  precedent  which could  govern  the  decision of a later  case,  involving  a

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similar  question.  Those decisions can be used only by  way of  illustrations of the different view-points which have  a bearing  on the decision of the case in hand.  It  has  also not  been disputed that in a case where a transaction  under examination,  is  not  in the line of the  business  of  the assessee,  and  is ail isolated or a single  instance  of  a transaction  like  that, the burden lies on the  Revenue  to bring  the  case within the words of the  statute,  .namely, that  it was an adventure in the nature of trade.  That  the onus  is  on the Department, has been clearly laid  down  by Lord Garmount in the case of Commissioners of Inland Revenue v.  Reinhold (1).  That was a case in which the  respondent, the  assessee, was a director of a company carrying  on  the business  of  WarehousemeD, and had bought  four  houses  in January, 1945, and sold them at a profit in December,  1947. He admitted that he had bought the property with a (1)  34 T. C. 389, 393. 855 view  to resale, and had instructed his agents to  sell  the same  whenever  a suitable purchaser was  forthcoming.   The assessee  was made liable for tax in respect of  the  profit made  by  him on the resale.  On an appeal by  the  assessee before  the General Commis- 7 sioners, it was  contended  on his  behalf that the profit on the resale was  not  taxable. On   behalf  of  the  Crown,  it  was  contended  that   the transaction of purchase and sale in question, constituted an adventure  in the nature of trade, and that, therefore,  the profits  arising out of the transaction, were chargeable  to income-tax.    The  General  Commissioners,   being   eqally divided,  allowed the appeal.  It was held by the  Court  of Session (First Division) that the fact that the property was purchased  with  a  view  to resale,  did  not,  of  itself, establish  that  the  transaction was an  adventure  in  the nature  of trade, and that, therefore, the determination  by the  Commissioners  was justifiable in law.  The  Court,  in coming  to  that  conclusion, took  into  account  the  con- siderations  that the respondent was not a  property  agent, and  that his business was not, in any way, associated  with the  purchase  and  sale of estates.   It  was  an  isolated transaction, even though the assessee had purchased a  hotel and  sold it again ten years previously.  The Court  made  a reference  to the following observations of Lord  Buckmaster in the case of Leeming v. Jones (1):- "............ an accretion to capital does not become income merely because the original capital was invested in the hope and  expectation that it would rise in value; if it does  so rise, its realization does not make it income." Placing that decision along-side of the present case, let us see what its salient features are.  Though the appellant  is engaged in various types of business as a share-holder or  a director in limited liability concerns, as also in  building contracts,  dealing in landed estates is not in the line  of his business.  If such a transaction were in the line of his business,   it  would  not  matter  much  whether,  in   the assessment  year, he had several such transactions  or  only one.  Even a single (1)  (1930) A. C. 4I5, 420. 856 transaction  of dealing in landed estates, being a  part  of his business, would be liable to income-tax, if a profit  is made in that transaction.  But., admittedly, the transaction in question is the only one of its kind, ,rout of which  the appellant  has made a considerable profit which  appears  to have been in the nature of a windfall.  When he entered into the agreement with the Society for the purchase of the plot,

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in  January,  1946, he had expected that at the end  of  the World  War, the Government would release the  property  from its requisition, and that the Society will develop the  land by laying the necessary roads and providing other  amenities to the plot-holders.  But as the Government did not  release the  property, and as the appellant was a  businessman,  who was  interested  in return from his capital, and as  he  had already  paid Rs. 32,000 odd by way of advance  towards  the purchase  price,  and as in 1947, at the end of  the  Second World  War,  his  business in contracts  for  building  con- structions,  began  to decline, he,  naturally,  thought  of making  the best of the bargain.  If he did not get  out  of the  transaction, his financial difficulties in meeting  his further  liabilities  under the agreement, as  a  result  of slump  in  his  main line of business,  might  lead  to  the forfeiture  of  the  advance of Rs.  32,000  odd,  he  would naturally  be on the lookout for a good purchaser.   He  was lucky to find a lady with a lot of money to spare, who  had, as he alleged, taken a fancy to the plot in question.  Thus, he could assign to her the benefit of his agreement with the Society on terms which were highly profitable to him.  There is  no  clear evidence in support of the  inference  of  the Appellate Tribunal that the land was purchased with the sole intention  of  selling it later at a profit.   The  Tribunal considered two alternatives in relation to this transaction- one,  that  the  land  was purchased in  order  to  build  a residential house, and the second, that it was purchased  in hope  of selling it later for a profit.  The first  alterna- tive, the Tribunal rejected on the ground that " be does not seem  to  have  very much of means at  his  disposal."  That itself  is a statement which does not bear  close  scrutiny. During the two years previous to the year under  assessment, the appellant had 857 been assessed to income-tax on Rs. 53,000/- and Rs. 59,000/- ,  as already indicated.  That does not lend countenance  to the  surmise  that  the appellant was not a  man  of  means. Admittedly, he held marketable shares of the value of  about 2  1/2 lacs of rupees, though all those shares  standing  in his  name, were not claimed by him as his omn.   Apparently, he   was  carrying  on  a  lucrative  business  during   the immediately preceding years.  It is true that in the year of assessment, on his own showing in his income-tax return,  he had suffered a loss, but that may have been a turning  point in his fortunes, and that would not necessarily lead to  the inference  that he was not in a sound financial position  on the date of the agreement with the Society.  It may be  that his  hopes  of flourishing in his business in the  years  to come,  were not realized after the conclusion of the  Second World War.  But even assuming that the Tribunal was right in its  conclusion as to the second alternative,  namely,  that the  purchase was made in the hope of making a profit  after re-sale, the matter is not concluded.  In this connection, a reference may be made again to the decision in Commissioners of  Inland Revenue v. Reinhold (supra), at p. 392, where  it was argued on behalf of the Revenue that a profit made in  a transaction which was in the nature of an investment in  the hope and expectation of a rise in price, may be an accretion of  capital,  but that if at the time of the  purchase,  the purchaser had resolved to sell the property in the event  of a profit being made, and instructions had been issued to his agents  accordingly,  the transaction could  not  have  been treated as an investment, but was truly an adventure in  the nature  of trade, and the profit thus made, must be  treated as  income.   This argument was not accepted as  valid.   In

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that  connection,  reference  was  made  to  the   following observations  of  Lord  Dunedin, in the  case  of  Jones  v. Leeming (1) :- "............  The fact that a man does not mean to hold  an investment  may  be  an item of  evidence  tending  to  show whether he is carrying on a trade or (1) (1930) A. C. 415, P. 423. 108 858 concern  in  the nature of trade in respect of  his  invest- ments, but per se it leads to no conclusion whatever." The decision of the House of Lords in the case afore.  said, which  is  also  reported in 15 T. C. 333,  is  rather  ins. tructive.   In  that case, the appellant was a member  of  a syndicate of four persons, formed to acquire an option  over a  rubber estate, with a view to selling at a  profit.   The option was secured, but the estate was considered to be  too small for re-sale.  An option over another joint estate  was accordingly  secured, and it was decided to resell  the  two estates  to a public company to be formed for  the  purpose. Another  member  of the syndicate undertook to  arrange  for promotion  of  the  company.  The  syndicate’s  rights  were transferred  to  a company.  This  company  floated  another company to which the properties were sold.  The  syndicate’s profits were divided between the members, and the appellant, as  one  of the members of the syndicate,  was  assessed  to income-tax  in  respect of his shares of the  profits.   The General  Commissioners, on appeal, were of the opinion  that the  interest in the property in question had been  acquired with the sole object of making a profit, and that there  was no  intention  of holding it as an investment.   Hence,  the assessment  to  income-tax was affirmed.  The  King’s  Bench Division,  at  the first hearing, remitted the case  to  the General Commissioners for a finding as to whether there  was a  concern  in the nature of trade,  and  the  Commissioners found  that the transaction was not such a concern.  It  was held by the House of Lords that the profits were not  liable to tax on the basis that they were income from an  adventure in the nature of trade.  Viscount Dunedin, in the course  of his opinion, referred, with apparent approval, to the dictum in Ryall v. Noare (1), to the following effect: "  A  casual profit made on an isolated purchase  and  sale, unless  merged with similar transactions in the carrying  on of a trade or business is not liable to tax." He also approved of the following dictum of Lawrence, L. J., in the case of Leeming v. Jones (2) :_ (1) (1923) 2 K.  B. 447, 454. (2) (1930) 1 K.B. 270, 302, 859 "  It seems to me in the case of an isolated transaction  of purchase  and re-sale of property there is really no  middle course  open.   It is either an adventure in the  nature  of trade,  or else it is simply a case of sale and  re-sale  of property." Lord  Warrington of Clyffe, in the course of his opinion  in the  case  of  Jones  v. Leeming  (1),  made  the  following observations,  which apply with full force to the facts  and circumstances of the present case:’ "  Here  we  have a case of the acquisition of  an  item  of property  and  a  profit made by  the  transfer  thereof  to another.   In this I can find nothing but a  profit  arising from  an  accretion  in value of the  item  of  property  in question and the realization of such enhanced value.   There is in this nothing in the nature of revenue or income.   The fact  that  the parties intended from the first  to  make  a

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profit  if  they  could does not in my  opinion  affect  the question we have to determine." As already indicated, the line of demarcation between  cases of isolated transactions of purchase and sale being ventures in  the  nature  of  trade, and those  which  are  not  such ventures,  if any, is very thin.  The cases in which  single transactions  have been held not to belong to the  class  of ventures  in the nature of trade, have been  noticed  above, and  the considerations which led those courts to hold  that such  ventures were not liable to income-tax, apply  to  the case  in  hand.  On the other side of the line, there  is  a series of cases in which single transactions have been  held to  have been ventures in the nature of trade,  for  reasons which do not apply to the present case.  We may notice  some of the typical cases which illustrate the reasons for  which a  single  transaction  was brought within the  ambit  of  a venture  in  the nature of trade.  The case  of  Californian Copper  Syndicate (Limited and Reduced) v. Harris  (Surveyor of Taxes) (2), related to the purchase and sale of a  mining property.   In that case, a company had been formed for  the purpose,  inter alia, of acquiring and re-selling  a  mining property.  That company acquired some mining property (1) (1930) A.C. 415, 425. (2) 5 T.C. 159. 860 and sold the same to a second company, consideration for the sale  being  paid-up shares of the latter company.   It  was held  by the Court of Exbhequer (Scotland) Second  Division, that the difference between the purchase price and the value of shares for which the property was exchanged was a  profit assessable  to incometax.  It was pointed out by  the  Court that  the case involved a deal which was a  "proper  trading transaction,  one  within the Company’s  power  under  their Articles,  and contemplated as well as authorised  by  their Articles  ". The ratio of the decision in that case  appears to  have  been that though it was a  single  transaction  in which profit was made, it was an adventure in the nature  of trade,  being  in the line of the business  adopted  by  the company.   The next case of Martin v. Lowry (1)  is  another instance  of  a single transaction of purchase  of  property being  treated  as  a venture in the  nature  of  trade,  on account  of the very nature and magnitude of  the  commodity dealt in by a person whose usual line of business was wholly outside  the scope of the new venture.  That was a  case  in which a wholesale agricultural machinery merchant, who never had  any  dealings  in  linen  trade,  purchased  from   the Government  its  surplus stock of aeroplane linen  (some  44 million  yards).  In order to dispose of this huge stock  of linen  purchased  by  him, the  assessee  embarked  upon  an extensive  advertising campaign, rented offices and  engaged expert   staff  to  organize  the  sales.   The  number   of transactions  of sale of that huge stock of linen, ran  into thousands.  The House of Lords affirmed the determination of the  courts below, holding that the transaction amounted  to the  carrying  on  of  a trade of  which  the  profits  were chargeable  to income-tax and Excess Profits Duty.   Another case  in  the same volume, is The  Commissioners  of  Inland Revenue  v.  Livingston and others (2).  In that  case,  the persons  sought  to  be  taxed  were,  a  ship  repairer,  a blacksmith and a fish salesman’s employee, who joined in the venture  of  purchasing  a  cargo  vessel  with  a  view  to converting  it into a steam-drifter, and selling  it.   That was a new line of business for them. (1) 11 T.C. 297. (2) 11 T.C. 538.

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861 Extensive  repairs and alterations to the ship were  carried out, and the result was a sale of the converted vessel at  a profit.   It  was  held  that  the  transaction,  though  an isolated  one,  was a venture in the nature  of  trade,  and thus, liable to income-tax.  The ratio of  the  decision was stated in the following words of the Lord President:- "  If the venture was one consisting simply in  an  isolated purchase  of some article against an expected rise in  price and a subsequent sale it might be impossible to say that the venture  was  ’in the nature of trade’ ;  because  the  only trade  in the nature of which it could participate would  be the  trade  of  a  dealer in such  articles,  and  a  single transaction  falls as far short of constituting  a  dealer’s trade, as the appearance of a single swallow does. of making a  summer.  The trade of a dealer necessarily consists of  a course of dealing, either actually engaged in or at any rate contemplated and intended to continue." The case of Rutledge v. The Commissioners of Inland  Revenue (1),  is  another illustration of a case in which  a  single transaction  of  purchase  and  sale,  was  held  to  be  an adventure  in  the nature of trade for the reason  that  the commodity purchased was of such a nature and of such a  vast magnitude that it could not have possibly been intended  for the consumption of the purchaser himself or his family.   In that  case,  the assessee was a money-lender  who  was  also interested  in  a cinema company.  In the  interest  of  his cinema business, he happened to be in Berlin, and there took the  opportunity  of purchasing, for a very cheap  price,  a very  large quantity (one million rolls) of toilet  paperfor pound 1,000-and realised pound ,12,000 by sale of that  com- modity.   He was taxed on the nett profit of  pound  10,895. It  was  held  by  the Court  of  Session,  Scotland  (First Division),  that it was certainly an adventure, because  the assessee  made himself liable for the purchase of that  vast quantity of toilet paper, obviously for no other conceivable purpose  than that of re-selling it for a large profit.   As regards the question whether the adventure was in the nature of trade, it was contended (1)  14 T.C. 490. 862 on behalf of the assessee that it was essential to the  idea of trade that there should be a continuous series of trading operations.  The Court rightly pointed out that the question was  not  whether  it was a trade but ‘  Whether  it  was  a venture  in the nature of trade.  Hence, though  the  single transaction  of purchase and sale, may not have amounted  to what  is  ordinarily understood by trade in the sense  of  a series  of transactions, it was certainly a venture  in  the nature  of  trade,  because from  the  very  beginning,  the intention was manifest that the purchase was made not with a view to utilizing the commodity for the personal use of  the purchaser,  but  with a view to making profit by  a  resale, which was apparent from the very nature and magnitude of the commodity purchased.  Another illustration of the same  rule is to be found in the case of The Balgownie Land Trust, Ltd. v.  The Commissioners of Inland Revenue (1).  That  was  the case  of  a landed estate which was left by  the  owner  to. trustees  with a direction to sell it.  The trustees,  being unsuccessful  in their efforts to sell the estate, formed  a company  with general powers to deal in real  property,  and transferred  the estate to this company.  The  company  made certain other purchases of property by way of accretions  to the original estate.  The property was sold in parts  during the  years  1921,  1924, 1926 and  1927.   The  company  was

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assessed  to  income-tax for the profits from the  sales  of those  lands.  The Court, confirming the assessment  of  the company  to income-tax on the profits made on  those  sales, held  that the company was doing precisely what it meant  to do,  namely, carrying on business of a company dealing in  a real estate.  The case of Commissioners of Inland Revenue v. Fraser  (2), is another illustration of the rule that  if  a person enters into a single transaction outside his ordinary avocation  of life, with the sole object of making a  profit by  re-sale, it may amount to an adventure in the nature  of trade.   In -that case, a wood-cutter bought,  for  re-sale, whisky  in large quantities, and without taking delivery  of the whisky, sold it at a profit.  It was the assessee’s sole (1) 14 T.C. 684. (2) 24 T.C. 498. 863 dealing  in  whisky,  but all the same, it was  held  to  be liable  to income-tax on the ground that the nature  of  the transaction,  with  reference to the commodity dealt  in  in large  quantities, which would not ordinarily be  meant  for personal or family consumption, may  indicate that it was an adventure in the nature of trade. We  have set out the illustrative cases on the two sides  of the  thin line of demarcation that may possibly be  said  to distinguish one class of case from the other.  The  question still  remains, on which side of the line, the present  case should  be  placed ? The  learned  Solicitor-General  placed strong  reliance on the recent decision of this Court in  G. Venkataswami  Naidu & Co. v. The Commissioner of  Income-tax (supra).   The question, therefore, is whether  the  present case  falls  on  the same side of the  line  as  the  recent decision  of  this Court, which had to deal with  a  similar question,  as already indicated. In that case, the  assessee had purchased four plots under four different deeds.  During the time that the assessee was in possession of those plots, he  made no efforts to put up any structures, or to  utilize them  in  other  ways.   The assessee  was  in  a  fiduciary position  with  the  Mills contiguous  to  which  the  plots purchased, were; and it was also found that the assessee was in a position to influence the Mills to purchase those plots at a price favourable to him.  It was in that setting of the facts, that this Court made the following obser- vations "When s. 2, sub-s. (4) refers to an adventure in the  nature of  trade  it clearly suggests that the  transaction  cannot properly  be regarded as trade or busi. ness.  It is  allied to  transactions that constitute trade or business  but  may not be trade or business itself It is characterized by  some pB‘= of the essential features that makeup 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." Can   it  be  said,  in  the  setting  of  the   facts   and circumstances  of the present case, set out above, that  the transaction in question has such characteristics-as 864 to  point  to  the conclusion that itwas a  venture  in  the nature of trade ? It was suggested that the area of the land in  question,  namely,  three quarters of  an  acre  in  the suburbs  of Calcutta, was large enough to indicate that  the assessee would not have intended to take it for his own  use and  occupation.   In the first place, the area  is  not  so large as to lead necessarily to the inference that it  could not  have  been meant to be used by him in -the way  of  his business or for his own residence.  Certainly, the  Society,

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having acquired more than 500 bighas of land in a lot, could not  claim that the land was meant for its own use.  On  the other side, it was meant to be developed into small building sites,  as they actually did.  But the Society had,  without developing the area, sub-divided it into building sites, one of which was sought to be acquired by the appellant.  He was carrying   on  an  engineering  concern,  and  it  is   not, therefore,  unlikely  that  he  may  have  intended,  as  he alleged, to put up a small workshop on a portion of the land to  be acquired, and to build his own residential  house  on the other portion.  It was not suggested that the  appellant had  his own house in Calcutta, and was, therefore,  not  in need  of a building site.  At the time he entered  into  the agreement  of purchase with the Society, he was  doing  good business,  as is shown by the large amounts on which he  was assessed  to  income-tax.  It was not unnatural for  him  to look forward to continue his business in as prosperous a way as he had been doing in the recent past, and thus, to  raise sufficient  funds to build his own residential house, or  to construct  a  workshop  for his  own  engineering  business. Hence, the possibility or the probability that the site  may appreciate  in value, would not necessarily lend  itself  to the  inference  that the transaction was a  venture  in  the nature of trade, as distinguished from a capital investment. In all the circumstances of this case, the total  impression created on our mind, is that it has not been made out by the Department that the dominant intention of the appellant  was to  embark  on  a venture in the nature of  trade,  when  he entered  into  the agreement which resulted in  the  profits sought to be taxed. 865 For  the aforesaid reasons, we would allow this appeal,  and set aside the orders of the Tribunal below with costs. KAPUR, J.-I regret I am unable to agree. that the appeal  in the  present  -case  should be allowed and  my  reasons  are these:  On  the  facts  which  were  proved  the  Income-tax Appellate Tribunal came to the conclusion that the  purchase of  land by the appellant was an adventure in the nature  of trade and profit arising therefrom was assessable to income- tax.   In coming to this conclusion the  Appellate  Tribunal took  into  consideration certain facts; (1) that  the  only payment the appellant made for the purchase of the land  was of  a sum of Rs. 32,748 which he borrowed from  his  company and  he  was  not in a position to pay the  balance  of  Rs. 98,246; (2) the appellant had no money available at all,  to pay  the part of the purchase price of Rs. 1,30,994  and  be had no means to construct the house ; (3) that his financial resources  were such as not to justify the purchase  of  the plot  of land for the construction of a house; (4) the  site itself  fetched  no income but it was a kind  of  investment with the hope of making a profit out of it and the land  was purchased  only  for  the  purpose of  sale;  (5)  that  the appellant being a keen businessman had intimate knowledge of the  trend of the rise in prices of land and  therefore  the purpose for which he made the purchase was in order to  make profit and not merely an investment. As against these circumstances various facts were brought to our notice which it has argued militate against the findings of the Tribunal : (1) that the appellant was carrying on  an engineering  concern and therefore it was not unlikely  that he  intended, as he alleged, to put up a small  workshop  on that  portion of land; (2) that the appellant did  not  have his  own house in Calcutta and therefore he could have  been in  need of a piece of land on which he could build a  house and  (3) that at the time -he entered into an  agreement  of

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purchase he had a prosperous business which is ,shown by the amount of income-tax which he paid for 109 866 two years and he could legitimately expect that his business would  continue to remain prosperous; (4) that  these  facts could  not  lead  to  the  necessary  consequence  that  the transaction  was a venture in the  nature of trade and  that it  was not the dominant intention of the appellant  at  the time  when he entered into the transaction to embark upon  a venture in the nature of trade. Under the Income-tax law it is the exclusive function of the Appellate Tribunal to find facts.  Even though the powers of this Court under Art. 136 are very wide yet they have to  be exercised within the limits imposed by the decisions of this Court  and one such limitation is that this Court  will  not ordinarily  interfere  with findings of fact.  It  has  been held by this Court that the question whether an adventure is in  the nature of a trade or not is a mixed question of  law and  fact.  The facts have to be found by  the  fact-finding authority  and to those facts the law has to be applied  and whenever  it  is  necessary to get a correct  finding  on  a question  of fact it is the fact finding authority which  is called  upon to consider the evidence and give its  finding. (See  G.  Venkataswami Naidu & Co. v.  The  Commissioner  of Income-tax (1)).  Therefore if there arose a question of law out  of  the  order  of  the  Appellate  Tribunal  then  the appellant  could have had the case stated to the High  Court under  s.  66(1) and if the Appellate  Tribunal  refused  to state the case it was open to the appellant to have the case stated  under  s. 66(2) of the Indian  Income-tax  Act.   No doubt  he did make an application to the Appellate  Tribunal to  state  the case under s. 66(1) but he did not  make  any application  to  the  High Court till  1957,  after  he  had obtained  special  leave in this Court and  the  High  Court dismissed  the petition on the ground that it was barred  by time.  The position comes to this that the tribunal  refused to  state the case under s. 66(1) of the Income-tax Act  and the appellant did not apply to the High Court under s. 66(2) till  long after the period of limitation had  expired.   In the circumstances the courses open to this (1) A.I.R. (1959) S.C. 359. 867 Court  would be (1) to set aside the order of the  Appellate Tribunal and remit the case to the Tribunal for decision  in accordance  with the observations made by this Court as  was done  in  the  case  of  Omar  Saly  Mohammed  Sait  v.  The Commissioner  of  Income-tax (1) or it may be open  to  this Court  to  direct  a reference as was  done  in  Jagta  Coal Company  v.  The Commissioner of Income-tax  (2).   Then  in Dhakeswari  Cotton Mills v. The Commissioner  of  Income-tax (3)  this  Court  only remitted the case  to  the  Appellate Tribunal  to  proceed in accordance with law on  the  ground that certain principles of natural justice had been violated and  the assessee was not given an opportunity to rebut  the evidence against him. The  Income-tax  law  has prescribed  a  procedure  to  have questions  of law determined and an assessee cannot  byepass the  various steps prescribed under that law.  The  position therefore  comes  to this that if there is  no  evidence  to support  the finding the question is one of law which  would fall under ss. 66(1) and 66(2) of the Income-tax Act; (2) if in  giving  its finding the  Appellate  Tribunal  disregards certain pieces of evidence or proceeds in a manner which  is violative  of natural justice the finding will  be  vitiated

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but if there is evidence to support the finding of fact  and these  findings  are properly arrived at then it will  be  a pure  question of fact which this Court will not  ordinarily interfere with ; (3) if there is an error of law arising  as above or because of misinterpretation of the Income-tax  law then  the  case has to be stated to the High  Court  in  the manner  provided in the Income-tax Act and if  the  assessee does  not choose to follow the procedure prescribed then  he cannot  come to this Court disregarding the remedy  provided by  the  Income-tax law and (4) the legal  effect  of  facts found where the point for determination is a mixed  question of  law  and  fact would fall under s. 66(1) &  (2)  of  the Income-tax  Act.  (See G. Venkataswami Naidu &  Co.  v.  The Commissioner of Income-tax (4) ). This is a case in which certain essential facts have (1)  C.A. No. 15 Of 1958 (2)  C. A. NO. 337 Of 1956. (3)  [1955] 1 S.C.R. 941. (4)  A.I.R. (1959) S.C. 359. 868 not been considered by the Appellate Tribunal and  therefore it  is  a case which should be remitted  to  the  Income-tax Appellate Tribunal to determine the facts in accordance with the  observations made by this ,,Court and in the  light  of those  findings to determine whether the transaction was  an adventure in the nature of a trade or not. I would order accordingly. ORDER OF THE COURT In  view  of  the opinion of the  majority,  the  appeal  is allowed with costs.