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PETITIONER: THE ORIENTAL INVESTMENT CO., LTD.

       Vs.

RESPONDENT: THE COMMISSIONER OF INCOME-TAX,BOMBAY.

DATE OF JUDGMENT: 22/05/1957

BENCH: KAPUR, J.L. BENCH: KAPUR, J.L. BHAGWATI, NATWARLAL H. DAS, S.K.

CITATION:  1957 AIR  852            1958 SCR   49

ACT: Income-tax-Reference   to  High  Court-Questions   of   law- Investment company-Dealer or Investor-Mixed question of  law and fact-Legal effect of facts found, a question of law.

HEADNOTE: The  appellant  company was incorporated  as  an  investment company  which by its memorandum of association enabled  it, inter alia, to deal in investments and properties.  For  the purposes of assessment to income-tax the appellant  claimed, for  the  assessment year in question, to be treated  as  an investor and not as a ,dealer on the ground that it did  not carry  on  any business in the purchase or sale  of  shares, securities or properties.  The Incometax Appellate  Tribunal held   that  according  to  the  company’s   memorandum   of association  and  its own assertions made all along  in  the past,  it should be treated as a dealer in  investments  and properties  and  that its income arising from the  sales  of shares  and properties should be taxed as business  profits. The  appellant’s  applications for a reference to  the  High Court  were rejected on the ground that no question  of  law arose out of the order of the Tribunal. Held,  that  the question whether the  appellant’s  business amounted   to  dealing  in  shares  and  properties  or   to investment, is a mixed question of law and fact and that the legal effect of the facts found by the Tribunal as a  result of  which the appellant could be treated as a dealer  or  an investor, is a question of law. Accordingly,  the order of the High Court was set aside  and the  case  remitted  to the High  Court  for  directing  the Tribunal to state a case. (1)  [1944] 12 I.T.R. 393. 50 Meenakshi  Mills,  Madurai v. Commissioner  of  Income  Tax, Madras, (1956) S.C.R. 691, applied. Case law reviewed.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No.

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153 of 1954. Appeal  by special leave from the judgment and  order  dated January  15,  1952, of the Bombay High Court  in  Income-Tax Application No. 54 of 1951. R.   J. Kolah, J. B. Dadachanji, S. N. Andley and  Rameshwar Nath, for the appellant. C.   K.  Daphtary, Solicitor-General of India, G.  N.  Joshi and R. H. Dhebar, for the respondent. 1957.  May 22.  The Judgment of the Court was delivered by KAPUR J.-This is an appeal by the assessee by special  leave and  the question for decision is whether questions of  law, if any, arise out of the order of the Appellate Tribunal. The facts giving rise to the appeal are that the  petitioner company  was incorporated on July 29,1924, as an  investment company, the objects of which are set out in el.  III of the memorandum of association and more particularly in  sub-cls. 1, 2, 15 and 16 of that clause.  The assessment years  under review. are 1943-44 to 1948-49, excepting the year  1947-48. According to its petition made in the High Court of  Bombay, the petitioner company dealt with its assets as follows: "The Petitioner Company purchased during the period 1st July 1925  to  30th  June  1928  shares  of  the  value  of   Rs. 1,86,47,789/- major portion of which was comprised of shares in  the Sassoon Group of Mills.  During the year ended  30th June  1929  the Petitioner Company  promoted  two  companies known as Loyal Mills Ltd. and Hamilton Studios Ltd. and took over  all their shares of the value of Rs. 10 1/2 lacs.   In the  year 1930, the Petitioner Company purchased  shares  of Rs.  1,33,930.  During the period of 9 years from  1st  July 1930  to  30th  July 1939 no purchases were  made  with  the exception of a few shares of Loyal Mills Ltd., 51 taken  over from the staff of E. D. Sassoon & Co. Ltd.,  who retired  from  service.  In the year ended  30th  June  1940 reconstruction scheme of the Appollo Mills Ltd., took  place under which debentures held by the Petitioner Company in the Appollo  Mills  Ltd., were redeemed and  the  proceeds  were reinvested  in the new issue of shares made by  the  Appollo Mills  Ltd.  Out of the purchases of the value of Rs.  2,794 made  by the Petitioner Company during the year  ended  30th June  1941 Rs. 2,000/- was the value of shares of the  Loyal Mills Ltd., taken over from the retiring staff.  In the year ended  30th June 1943 the Petitioner Company took over  from the David Mills Co. Ltd., shares of The Associated  Building Co., of the value of Rs. 56,700/-.  After this there were no purchases  at  all to this date excepting purchases  of  the value  of Rs. 34,954 during the year ended 30th June,  1946. " The sales are contained in para 3 (b) which may be quoted: "  In  relation  to the purchases  made  by  the  Petitioner Company as stated above no appreciable sales of shares  were made during the period 29th July 1924 to 30th June 1942, the sales made in the year ended 30th June 1929 of the value  of Rs. 1,29,333 included shares of the value of ’Rs. 45,000  in the  Loyal Mills Ltd., sold to the members of the staff  and shares  of  the value of Rs.  83,833  representing  sterling investments  handed over to the creditors of the  Petitioner Company in part repayment of the loan taken from them in the year  ended  30th  June 1931, shares of  the  value  of  Rs. 7,48,356 were handed over to the creditors in payment of the loan granted by them.  From the year ended 30th June 1943 E. D.  Sassoon & Co. Ltd., started relinquishing  the  managing agencies  of  the various Mills under their agency  and  the shares  held by the Petitioner Company in the Sassoon  Group of  Mills were handed over to the respective  purchasers  of

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the Mills agencies.  " This  gives the history of the acquisition and  disposal  of shares  and also how the various transactions  were  entered into  and  why.  Prior to 1940 the assessee company  made  a claim every year for being treated as 52 a dealer in investments and properties  but this  contention was consistently repelled and upto the assessment year 1939- 40  the assessee company was assessed on the basis of  being an  investor  but it appears that for  the  assessment  year 1940-41 and the two following years 1941-42 and 1942-43  the Department  accepting  the  plea  of  the  assessee  company treated  it as a dealer in shares, securities and  immovable properties  and assessed it on that basis.  For these  years and  for  the assessment year 1943-44 the company  made  its Return  on that basis.  But after the Return had been  filed for  the  year  1943-44 the assessee  company  withdrew  its Return  and  filed  a  revised  Return  on  March  7,  1944, contending that it was not a dealer but merely an  investor. Along with the Return it filed a letter dated March 6, 1944, in which inter alia it stated: "The  Return  of Total Income which was submitted  with  the Company’s letter of 25th May 1943 was prepared in conformity with  the ruling of the Income. tax Officer in  the  1940-41 assessment  that the company was to be assessed as a  dealer in investments.  Since that Return was submitted the Central Board of Revenue has decided that the Company is an  Invest- ment  Holding Company and accordingly an amended  Return  of Total  Income under Section 22 (1) of the Indian  Income-tax Act is submitted herewith on which the assessment for  1943- 44 may be based, as on this particular question the  company obviously cannot have one status for Excess Profits Tax  and another for Income-tax.  " It was also contended that it never carried on any  business in the purchase or sale of shares, securities or  properties and  therefore  prayed  that in view of  the  order  of  the Central  Board of Revenue made on its application  under  s. 26(1)  of the Excess Profits Tax Act it should  be  assessed for income-tax purpose as an investor and not as a dealer. The  Income-tax  Officer rejected this plea and "  held  the investments  as the stock-in-trade of its  business  therein which  it carried on during the ’previous year’ also ".  The company   took   an  appeal  to  the   Appellate   Assistant Commissioner which was dismissed and the                              53 order of the Income-tax Officer upheld.  It then appealed to the  Income-tax Appellate Tribunal, Bombay, where  the  same contentions  were raised but were, repelled.   The  Tribunal said: "  The  company having itself raised the point  in  all  the prior  years  that  it  was  a  dealer  in  investments  and properties,  it would appear to be difficult  to  understand why  the company now seeks to get the position  changed  and desires the Income-tax Officer to treat it as if it was  not dealing in shares, securities and immoveable properties." The  Tribunal  after holding that the company was  under  no misapprehension   when  it  claimed  to  be  a   dealer   in investments in the earlier years because it was then  always incurring losses and that the present contention was  raised because it made "substantial profits" said: "but  we  have  no doubt that, according  to  the  company’s memorandum  of association and its own assertions  made  all along  in  the past, the assessee company is  a  ’dealer  in investments  and properties and the income arising to it  on the  sale  thereof has been rightly held by  the  Income-tax

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Officer  to  be  business profits liable to  tax  under  the ordinary provisions of the Income-tax Act." Thus  the grounds on which the case was decided against  the assessee  were (1) that the assessee claimed to be a  dealer or  an  investor  according as it incurred  losses  or  made profits and (2) that because of the objects contained in the memorandum of association and because of its assertion  made in the past as being a dealer the assessee could not be held to be an investor. The company then applied to the Appellate Tribunal under  s. 66(1)  of the Indian Income-tax Act for a reference  of  the following questions for the opinion of the High Court: "(1)  Whether on the facts and in the circumstances  of  the case the assessee company can rightly be treated as a dealer in investments and properties; and 54 (2)Whether  the profits and losses arising from the sale  of shares, securities and immoveable properties of the assessee company can be taxed as-business profits." This  prayer  was rejected because in the  opinion  -of  the Tribunal no question of law arose out of its order.  It said : " The Tribunal did not decide this point merely because  the company’s  memorandum  of  association  gave  power  to  the company  to deal in investments and properties, but  it  was actually found that the company had dealt in investments and properties  throughout  and had also all along in  the  past asserted   that   it  was  a  dealer  in   investments   and properties." This was more than it had said in its appellate order. The assessee company then made an application under s. 66(2) of  the  Indian Income-tax Act for requiring  the  Appellate Tribunal  to state the case and refer it to the  High  Court but  this  application was dismissed, and then  the  company obtained special leave to appeal to this Court. Counsel for the assessee company contends that the questions of  law arise out of the order of the Tribunal  because  the Tribunal  has  ignored  the  documentary  evidence  produced before it, has based it decision on irrelevant matters,  has failed to consider crucial facts and has misdirected  itself by  assuming that the petitioner was a dealer from the  very beginning  which  was  contrary to  the  documents  produced before it. Section 66 (1) of the Income-tax Act (hereinafter termed the Act)  provides that any assessee may require  the  Appellate Tribunal  to  refer to the High Court any  question  of  law arising  out of its appellate order and it is the  statutory duty of the Appellate Tribunal to draft the statement of the case and refer the question of law arising out of such order to the High Court but the primary requirement is that  there must be a question of law arising out of the order.   Should the  Tribunal refuse to state the case as required under  s. 66(1)  of  the  Act on the ground that no  question  of  law arises, the assessee has the right to apply to the High                              55 Court  requiring the Appellate Tribunal to state a case  and refer  it  to  the  High  Court  but  again  the   essential consideration is the existence of a question of law. arising out of the order. To draw a line between what is a question of law and what is a  question of fact is not always easy.  It is difficult  to define this distinction which has given rise to a number  of decisions, which it will be useful to discuss at this stage. In  Stanley  v. Gramophone and  Typewriter,  Limited(1)  the Master of the Rolls discussed this question as follows :

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"  It is undoubtedly true that, if the Commissioners find  a fact, it is not open to this court to question that  finding unless there is no evidence to support it.  If, however, the Commissioners state the evidence which was before them,  and add  that upon such evidence they hold that certain  results follow,  I  think  it  is open,  and  was  intended  by  the Commissioners  that it should be open, to the court  to  say whether the evidence justified what the Commissioners held." These  observations  were explained by Hamilton  J.  in  The American Thread Co. v. Joyce (2) as implying that by  giving the   material  on  which  their  finding  was   based   the Commissioners  were inviting the court to determine  whether on  that  material  they could reason. ably  arrive  at  the conclusion on which they did arrive.  The House of Lords  on appeal  categorically  confirmed  that  the  Courts  had  no jurisdiction over conclusions of fact except to see  whether there  was  evidence to justify them and that  proper  legal principles had been applied. Lord Clerk in Californian Copper Syndicate v. Harris (3) has laid down the test in the following words: "  the  question to be determined being-Is the sum  of  gain that has been made a mere enhancement of value by  realising a security, or is it a gain made in an (1)  (1908) 5 T.C. 358, 374. (2)  (1911) 6 T.C. 1. (3) (1904) 5 T.C. 159, 166. 56 operation  of business in carrying out a scheme for  profit- making." In  that  case  the objects set out  in  the  memorandum  of association  pointed  distinctly  to  a  highly  speculative business and the mode of actual procedure of the company was also   directed   in  the  same  direction.    Taking   into consideration  the  course of dealing of the shares  by  the company  and also that the turning of investment to  account was  not merely incidental but was an essential  feature  of the business, speculation being among the appointed means of the company’s business the court came to the conclusion that the company was carrying on a business. The Lord President in a Scottish case Cayzer, Irvine &  Co., Ltd.  v.  Commissioners  of Inland Revenue  (1)  stated  the grounds on which the court can interfere with the finding of the Commissioner as follows: " I think we have jurisdiction to entertain the question  at law, which is whether the majority of the Commissioners were warranted  on -the evidence in determining as they did.   At the  narrowest it is always open to this Court in  a  Stated Case to review a finding in fact on the ground that there is no evidence to support it." Lord Parker in Farmer v. Trustees of the Late William Cotton (2)  after  referring to the  difficulty  of  distinguishing between a question of fact and a question of law observed: " Where all the material facts are fully found, and the only question is whether the facts are such as to bring the  case within  the provisions properly construed of some  statutory enactment, the question is one of law only." But  this statement of the law was considerably modified  in Inland  Revenue  Commissioners v. Lysaght (3) where  it  was held  that if the issue before the court could be  described as a "question of degree" the conclusion must be a  question of fact. (1)  (1942) 24 T.C. 491, 501. (2)  [19I5] A.C. 922,932. (3)   [1928] A.C. 234. 57

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The Commissioners of Inland Revenue v. The Korean Syndicate, Ltd. (1) was a case where a syndicate was registered for the purpose  of  acquiring and working concessions  and  turning them  to account, and of investing and dealing  with  monies not immediately required.  The syndicate acquired part of  a right  to a concession in Korea and then under an  agreement described  as a "lease", in consideration of receiving  sums of   money   termed  "royalties"  but  which   were   really percentages  of profits made by assignee  company,  assigned the lease to a development company.  Some moneys which  were received  from  sale  of  certain  shares  obtained  by  the syndicate in exchange for shares originally acquired in  the mining company were deposited in a bank.  The activities  of the  company  were during the relevant  period  confined  to receiving the bank interest and royalties, distributing  the amount  amongst its shareholders as dividend.  The  question for  decision  was whether the syndicate was carrying  on  a business  and was therefore liable to excess  profits  duty. From these facts it was concluded that they were carrying on a business. Atkinson  L.J. pointed out at p. 204 that merely  because  a company is incorporated it does not necessarily follow  that it is carrying on business.- Its memorandum only shows  that the  company was incorporated for a particular  purpose  but taking into consideration the surrounding circumstances  and facts  of  the case it was concluded that  the  company  was carrying on a business. In  Great Western Railway Company v. Bater (2) the  question for  decision was whether a clerk held a -public  office  to fall  within Sch.  E. It was held that the determination  by the  Commissioners of questions of pure fact are not  to  be disturbed unless it should appear that there was no evidence before them upon which they, as reasonable men, could arrive at the conclusion which they came to.  Lord Atkinson said: " What I have many times in this House protested against  is the  attempt to secure for a finding on a mixed question  of law and fact the unassailability (1) (1921) 12 T.C, 181.  (2) (1922) 8 T.C. 231, 244. 8 58 which  belongs only to a finding on questions of pure  fact. This  is sought to be affected by styling the finding  on  a mixed question of law and fact a finding of fact." According  to the dictum of Lord Wrenbury the  question  for the  Court was whether on the facts found and stated by  the Commissioners  the clerk held the office within the  meaning of the Act which was a question of law. In  Lysaght v. The Commissioners of Inland Revenue  (1)  the question  for  decision  was  whether  the  assessee  was  a resident  and ordinarily resident in United Kingdom  in  the year of assessment.  Lord Buckmaster said:. " The distinction between questions of fact and questions of law  is  difficult  to It is, of course, true  that  if  the circumstances found by the Commissioners in the Special Case are  incapable  of constituting residence  their  conclusion cannot  be  protected by saying that it is a  conclusion  of fact since there are no materials upon which that conclusion could  depend.  But if the incidents relating to  visits  in this country are of such a nature that they might constitute residence, and their prolonged or repeated repetition  would certainly  produce  that result, then the matter must  be  a matter  of degree; and the determination of whether  or  not the  degree  extends  so far as to make a  man  resident  or ordinarily resident here is for the Commissioners and it  is

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not  for the Courts to say whether they would  have  reached the same conclusion." Jones  v.  Leeming(2) was a case where the  respondent  with three other -persons obtained an option to purchase a rubber estate  in  the  Malay Peninsula.  That  estate  along  with another was sold at a profit.  The Commissioners found  that the  respondent  had  acquired the property  with  the  sole object  of turning it over again at a profit and at no  time had  he the intention of holding it.  This  transaction  was held  not  to  be in the nature of  trade  nor  the  profits arising  therefrom  in the nature of income  but  they  were accretions to (1) (1928) 13 T.C. 511, 533, 534. (2) [1930] A.C. 4I5. 59 capital  and therefore not subject to tax under Case  VI  of Sch.  D. In  Cameron v. Prendergast (1) the following test  was  laid down by Viscount Maugham: "  Inferences  from facts stated by  the  Commissioners  are matters  of law, and can be questioned on appeal.  The  same remark is true as to the construction of documents.  If  the Commissioners                   state                    the evidence.............................................. it is open to the court to differ from such holding." In Bomford v. Osborne (2) a farm was working as a mixed farm but as a single unit.  The question for decision was whether the assessment could be apportioned one part being  assessed as  a farm and the other as a nursery.  Viscount Simon  laid down the test in the following words: "  No  doubt there are many cases  in  which  Commissioners, having had proved or admitted before them a series of facts, may   deduce   therefrom  further  conclusions   which   are themselves  conclusions  of  pure  fact.   In  such   cases, however, the determination in point of law is that the facts proved   or  admitted  provide  evidence  to   support   the Commissioner’s  conclusions."  It was also  held  that  this question was a mixed question of law and fact. Du  Parcq  J.  in  J.  H.  Bean  v.  Doncaster   Amalgamated Collieries  Ltd.(3)  held the following to be the  test  for determining whether the question is one of fact or law: " Unless the Commissioners, having found the relevant  facts and put to themselves the proper question, have proceeded to give  the right answer, they may be said, on this  view,  to have erred in point of law.  If an inference from facts does not  logically  accord with and follow from them,  then  one must  say that there is no evidence to support it.  To  come to a conclusion which there is no evidence to support is  to make an error in law." (1)  [1940] 2 All E.R. 35, 40.  (3) [1944] 2 All  E.R.  279, 284. (2)  [1941] 2 All E.R. 426, 430. 60 In  Edward  v. Bairstow (1) the respondent embarked  upon  a joint  venture to purchase a spinning plant with the  object of holding it for quick resale and at a profit.  The General Commissioners found that there was no venture in the  nature of  trade  but  the  court held that  the  facts  found  led inevitably  to  the conclusion that the  transaction  was  a venture  in the nature of trade and that the  Commissioners’ inference to the contrary was erroneous. Lord Simonds observed at p. 54 that: "  To say that a transaction is, or is not, an adventure  in the  nature of trade is to say that it has, or has not,  the characteristics which distinguish such an adventure.  But it

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is  a  question  of  law,  not  of  fact,  what  are   those characteristics......... At p. 55 Lord Radcliffe pointed out: " I think that it is a question of law what meaning is to be given   to  the  words  of  the  Income  Tax   Act   "trade, manufacture,  adventure or concern in the nature  of  trade" and  for  that matter what constitutes  "profits  or  gains" arising from it.  Here we have a statutory phrase  involving a  charge of tax, and it is for the courts to interpret  its meaning,  having regard to the context in which  it  occurs, and  to  the  principles which they bring  to  bear  on  the meaning of income." and then at p. 57 laid down the test  in the following words: "  When the case comes before the court, it is its  duty  to examine the determination having regard to its knowledge  of the  relevant law.  If the case contains anything  ex  facie which  is bad law and which bears on the  determination,  it is, obviously, erroneous in point of law.  But, without  any such  misconception appearing ex facie, it may be  that  the facts  found are such that no person acting  judicially  and properly  instructed as to the relevant law could have  come to the determination under appeal." The  dicta of Warrington L.J. in Cooper v. Stubbs  (2)  that intervention by a court is proper only: (1) [1955] 3 All E.R. 48. (2) [1925] 2 K.B. 753, 768, 772. 61 missioners  have come to their conclusion  without  evidence which  should  support it, that is to say, have  come  to  a conclusion  which  on the evidence no reason-’  able  person could arrive at, or have misdirected themselves in point  of law." and of Atkin L.J. that: to  one conclusion of law..." were quoted with  approval  by Lord Radcliffe at pp. 56 and 57. A review of these authorities shows that though the  English decisions  began  with  a  broad  definition  of  what   are questions of law, ultimately the House of Lords decided that a  "matter of degree" is a question of fact and it has  also been  decided that a finding by the Commissioners of a  fact under  a  misapprehension  of law or  want  of  evidence  to support a finding are both questions of law. The   Privy  Council  in  Commissioner  of   Income-tax   v. Laxminarain Badridas (1) said: "  No  question of law was involved; nor is it  possible  to turn  a  mere  question of fact into a question  of  law  by asking  whether  as a matter of law the officer  came  to  a correct conclusion upon a matter of fact.  " Bose  J.  in  Seth Suwallal  Chhogalal  v.  Commissioner  of Income-tax(2) stated the test as follows: " A fact is a fact irrespective of the evidence by which  it is  proved.   The only time a question of law can  arise  in such a case is when it is alleged that there is no  material on  which  the  conclusion can be  based  or  no  sufficient material." Sufficiency  of evidence was explained to mean  whether  the Income-tax  authority considered its existence  so  probable that a prudent man ought under the circumstances of the case to act upon the supposition that it exists. The  question  for  decision  in  Dhirajlal  Girdharilal  v. Commissioner  of Income-tax, Bombay(3) was whether  a  Hindu undivided family was carrying on business in (1) [1937] 5 I.T.R. I70, 179.  (3) [1954] 26 I.T.R. 736. (2)  [1949] 17 I.T.R. 269, 277. 62 shares and it was held that this was a question of fact  but

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if  the  Appellate Tribunal decided the question  by  taking into  consideration  materials which are irrelevant  to  the enquiry  or partly relevant and partly irrelevant  or  based its decision partly on conjectures then in such a  situation an issue of law arises, which would be subject to review  by the  court  and the finding given by the Tribunal  would  be vitiated. The  result of the authorities is that inference from  facts would be a question of fact or of law according as the point for determination is one of pure fact or a mixed question of law and fact and that a finding of fact without evidence  to support it or if based on relevant and irrelevant matters is not unassailable. The  limits of the boundary dividing questions of  fact  and questions  of law were laid down by this court in  Meenakshi Mills,  Madurai  v. Commissioner of Income-tax,  Madras  (1) where the question for decision was whether certain  profits made and shown in the name of certain intermediaries were in fact  profits  actually  earned  by  the  assessee  or   the intermediaries.   Taking  the  course of  dealings  and  the extent   of  the  transaction  and  the  position   of   the intermediaries  and all the evidence into consideration  the Tribunal came to the conclusion that the intermediaries were dummies   brought  into  existence  by  the  appellant   for concealing the true amount of profits and that the sales  in their  name  were  sham  and  fictitious  and  profits  were actually earned by the assessee.  The test laid down by this Court  is  to  be  found in the  various  passages  in  that judgment.   At p. 701 Venkatarama Ayyar J. pointed out  that questions of fact are not open to review by the court unless they are unsupported by any evidence or are perverse.  At p. 706 it was observed : " In between the domains occupied respectively by  questions of  fact  and of law, there is a large area  in  which  both these  questions  run into each other, forming  so  to  say, enclaves  within each other.  The questions that  arise  for determination  in that area are known as mixed questions  of law   and   fact.   These  questions   involve   first   the ascertainment  of facts on the evidence adduced and  then  a determination of the (1)  [1956] S.C.R. 691. 63 rights  of the parties on an application of the  appropriate principles of law to the facts ascertained. The law was thus summed up at p. 720: (1)  When the point for determination is a pure question  of law such as construction of a statute or document of  title, the  decision  of the Tribunal is open to reference  to  the court under s. 66 (1). (2)  When the point for determination is a mixed question of law and fact, while the finding of the Tribunal on the facts found  is final its decision as to the legal effect of  that finding  is a question of law which can be reviewed  by  the court. (3)  A finding on a question of fact is open to attack under s.  66  (1) as erroneous in law if there is no  evidence  to support it or if it is perverse. (4)  When  the finding is one of fact, the fact that  it  is itself  an inference from other basic facts will  not  alter its character as one of fact. In the instant case the Appellate Tribunal in its  appellate order has set out the amount of profits made by the assessee company  in the years of assessment 1943-44 to 1948-49.   It has  also mentioned the inconsistent positions taken  up  by the assessee in first claiming to be a dealer and then to be

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an  investor which according to the Tribunal was due to  the fact  that it was incurring losses in the earlier years  and had begun making profits when the claim of being an investor was  put  forward.   But the two basic facts  on  which  the Tribunal has based its findings are: (1)  the objects set out in the memorandum of association of the assessee company;  (2) the previous assertion by the assessee company that  it was a dealer in investments and not merely an investor. Counsel  for the assessee relies on the decision  of  Kishan Prasad & Co., Ltd. v. Commissioner of Incometax, Punjab  (1) where  this  Court  held that  the  circumstance  whether  a transaction  is or is not within the powers of  the  company has  no bearing on the nature of the transaction or  on  the question  whether the profits arising therefrom are  capital or  revenue income and, therefore, it is contended that  the Tribunal has (1)  [1955] 27 I.T.R. 49. 64 relied upon an irrelevant circumstance.  Counsel for Revenue on  the other hand refer to the judgment  in  Lakshminarayan Ram Gopal  v. Government of Hyderabad (1) where the  objects of  an incorporated company were held not to  be  conclusive but  relevant for the purpose of determining the nature  and scope  of  its activities.  Merely because the  company  has within its objects the dealing in investment in shares  does not  give to it the characteristics of a dealer  in  shares. But  if other circumstances are proved it may be a  relevant consideration  for the purpose of determining the nature  of activities  of an assessee.  Whether in the instant case  it will have any relevance because of other materials on  which the assessee company was relying in support of its case that it  was merely an investor and not a dealer will have to  be considered when the suggested questions of law are answered. As  to  what  are the characteristics  of  the  business  of dealing in shares or that of an investor is a mixed question of  fact  and law.  What is the legal effect  of  the  facts found  by the Tribunal and whether as a result the  assessee can  be termed a dealer or an investor is itself a  question of law. The  questions  of law that arise out of the  order  of  the Tribunal are: (1)Whether there are any materials on the record to  support the  finding  of the Income-tax Officer  that  the  assessee company  was a dealer in shares, securities  and  immoveable property during the assessment year in question ? (2)Whether  the profits and losses arising from the sale  of shares, securities and immoveable properties of the assessee company can be taxed as business profits ? We would therefore allow this appeal, set aside the order of the  High  Court and remit the case to the  High  Court  for directing the Tribunal to state a case on the aforesaid  two questions.  The appellant will have its costs in this  Court and  in  the High Court for the proceedings  so  far  taken. Further costs will be in the discretion of the High Court. Appeal allowed.  Case remitted. (1)  [1955] I.S.C.R. 393; [1954] 25 I.T.R. 449. 65