# DALMIA CEMENT LIMITED v. COMMISSIONER OF INCOME TAX, NEW DELHI

- **Citation:** [1977] 1 S.C.R. 554
- **Court:** Supreme Court of India
- **Decided:** 1976-09-10
- **Bench:** A. N. Ray, M. H. Beg, P. N. Shinghal
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/dalmia-cement-limited-v-commissioner-of-income-tax-new-delhi-6951
- **Pages:** 9

## Headnote

Income Tax Act, 1922, s. 2(4)-When can a single and isolated sale be a
business transaction within the meaning of-Onus probandi
011 the Taxation
Department-Initial purchase with intention of advantageous sale-Earning profit on delivery of goods not necessary.
In 1946, ·the appellant ordered cement manufacturing machinery from a firm
in Denmark, for its f~ctory in Dandot, but long before the machinery was due,
the country was parlit10ned and Dando! went to Pakistan. Instead of cancelling
his order, the appellant imported the machinery. It was found that the appellant
did so with the intention of selling it at a profit, to the Orissa State. At the
time of the sale, the appellant charged only the invoice price initially paid by it,
bnt later, obtained a profit.
The Income Tax Officer treated the profit
as
income earned pursua.nt to an adventure in the nature of trade, and taxed it as
such.
The appellant's appeals were rejected by the Appellate Taxation Authorities. The inattei' was then referred to the High Court u/s. 66 ( 1) of the income
Tax Act, but was dismissed.
·
"The. appellant contended that making a profit was not. its intention at the
time of sale, and that being a single and isolated transaction of purchase and
sale, it was not an adventure in the nature of trade within the meaning of s. 2( 4)
of the Act, and that the onus of proving anything to the contrary, lay upon the
Department.
Dismissing the appeal, the CourtHELD : (i) It is well settled that even a single and isolated transaction can
be held to be capable of falling within the definition of "business" if it bears
clear indicia of trade. The fact that the transaction is not in the way of business of the assessee does not in an}l way alter the character of the transaction.
[556H,-557A]
Narain Swadeshi Weaving Mills v. Commissioner of Excess Profits Tax (25
I.T.R. 765), G. Venktttaswami Naidu & Co. v. The Commissioner of Income
Tax [1959] Supp. (1) S.C.R. 646, Saroj Kumar Mazumdar v. The Commissioner
of Income Tax, West Bengal, Calcutta [1959) Supp. (2) S.C.R. 846 followed.
(2) It is a correct proposition of law that as it was a single and isolated
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transaction. of purchase and sale, the onus of proving that it was a transaction
"'-
in the nature of trade lay on the department. [560 D-E]
(3) The appellant had the dominant intention of selling the Dando! machinery to its own advantage, and acted with the set purpose of taking an advantage
of its position as the owner of the imported machinery. Even if the ·appellant
had not earned any profit whatsoever at the time of the sale or very soon thereafter, the transaction, in the facts and circumstances of this case, would nonetheless have been an adventure in the "nature of trade", and a business transaction
within the meaning of Section 2( 4) of the Act. [560H, 561B, 562A-B]
Narain Swadeshi Weaving Mills v. Commissioner of Excess Profits Tax
(Supra), and G. Venkataswami Naidu & Co. v. The Commissioner of Income
Tax (Supra) followed.
.
Kishan Prasad & Co. Ltd. v. Commissioner of Income Tax, Punjab (27, I.T.R.
49), Saroj Kumar Mazumdar v. The Commissioner of l11;co_me Tax, West Bengal, .
Calcutta (Supra) Janki Ram Bahadur Ram v. Commissioner of Income Tax,
Calcutta [1965] 3 S.C.R. 604. and Ajax Products Ltd. v. Commissioner of lnwrneTax, Madras ( 43 I.T.R. 297) distinguished.
...
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DALMIA CEMENT v. COMMISSIONER OF I.T. (Shing!wl, J.)
555
Clv1L APPELLATE JURISDICTION : Civil Appeal No. 1437 of 1971.
A
(Appeal by Special Leave from the Judgment and order dated
28-4-1970 of the Delhi High Court in Income 'Pax Reference No. 50/
65)
V. S. Desai, Mrs, Leila Seth and Parvee11 Kumar for the Appellant.
S. T. Desai & M. N. Shroff, for the Respondent.

## Text

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554
DALMIA CEMENT LIMITED
v.
COMMISSIONER OF INCOME TAX, NEW DELHI
September 10, 1976
[A. N. RAY, C.J., M. H. BEG AND P. N. SHINGHAL, JJ.]
Income Tax Act, 1922, s. 2(4)-When can a single and isolated sale be a
business transaction within the meaning of-Onus probandi
011 the Taxation
Department-Initial purchase with intention of advantageous sale-Earning profit on delivery of goods not necessary.
In 1946, ·the appellant ordered cement manufacturing machinery from a firm
in Denmark, for its f~ctory in Dandot, but long before the machinery was due,
the country was parlit10ned and Dando! went to Pakistan. Instead of cancelling
his order, the appellant imported the machinery. It was found that the appellant
did so with the intention of selling it at a profit, to the Orissa State. At the
time of the sale, the appellant charged only the invoice price initially paid by it,
bnt later, obtained a profit.
The Income Tax Officer treated the profit
as
income earned pursua.nt to an adventure in the nature of trade, and taxed it as
such.
The appellant's appeals were rejected by the Appellate Taxation Authorities. The inattei' was then referred to the High Court u/s. 66 ( 1) of the income
Tax Act, but was dismissed.
·
"The. appellant contended that making a profit was not. its intention at the
time of sale, and that being a single and isolated transaction of purchase and
sale, it was not an adventure in the nature of trade within the meaning of s. 2( 4)
of the Act, and that the onus of proving anything to the contrary, lay upon the
Department.
Dismissing the appeal, the CourtHELD : (i) It is well settled that even a single and isolated transaction can
be held to be capable of falling within the definition of "business" if it bears
clear indicia of trade. The fact that the transaction is not in the way of business of the assessee does not in an}l way alter the character of the transaction.
[556H,-557A]
Narain Swadeshi Weaving Mills v. Commissioner of Excess Profits Tax (25
I.T.R. 765), G. Venktttaswami Naidu & Co. v. The Commissioner of Income
Tax [1959] Supp. (1) S.C.R. 646, Saroj Kumar Mazumdar v. The Commissioner
of Income Tax, West Bengal, Calcutta [1959) Supp. (2) S.C.R. 846 followed.
(2) It is a correct proposition of law that as it was a single and isolated
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transaction. of purchase and sale, the onus of proving that it was a transaction
"'-
in the nature of trade lay on the department. [560 D-E]
(3) The appellant had the dominant intention of selling the Dando! machinery to its own advantage, and acted with the set purpose of taking an advantage
of its position as the owner of the imported machinery. Even if the ·appellant
had not earned any profit whatsoever at the time of the sale or very soon thereafter, the transaction, in the facts and circumstances of this case, would nonetheless have been an adventure in the "nature of trade", and a business transaction
within the meaning of Section 2( 4) of the Act. [560H, 561B, 562A-B]
Narain Swadeshi Weaving Mills v. Commissioner of Excess Profits Tax
(Supra), and G. Venkataswami Naidu & Co. v. The Commissioner of Income
Tax (Supra) followed.
.
Kishan Prasad & Co. Ltd. v. Commissioner of Income Tax, Punjab (27, I.T.R.
49), Saroj Kumar Mazumdar v. The Commissioner of l11;co_me Tax, West Bengal, .
Calcutta (Supra) Janki Ram Bahadur Ram v. Commissioner of Income Tax,
Calcutta [1965] 3 S.C.R. 604. and Ajax Products Ltd. v. Commissioner of lnwrneTax, Madras ( 43 I.T.R. 297) distinguished.
...
_,
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¥"
•
DALMIA CEMENT v. COMMISSIONER OF I.T. (Shing!wl, J.)
555
Clv1L APPELLATE JURISDICTION : Civil Appeal No. 1437 of 1971.
A
(Appeal by Special Leave from the Judgment and order dated
28-4-1970 of the Delhi High Court in Income 'Pax Reference No. 50/
65)
V. S. Desai, Mrs, Leila Seth and Parvee11 Kumar for the Appellant.
S. T. Desai & M. N. Shroff, for the Respondent.
The Judgment of the Court was delivered by
SHINGHAL, J.-This appeal by special leave is directed against the
judgment of the Delhi High Court dated April 28, 1970 in a reference
B
made by the Income-tax Appellate Tribunal (Delhi Bench A)
under
C
section 66 (l) of the Income-tax Act, 1922, hereinafter referred to as
the Act; in respect of the following question,-
"Whether on the facts and circurnsta nccs of the case the sum
of Rs. 7 lakhs received from M/s Orissa Cement Ltd. was
pursuant to an adventure in the nature of trade and as such
tanable under the lndian .Income-tax Act, 1922 ?"
D
The liigh Court has answered the question in the affirmutive.
We shall refer to the facts giving rise to the controversy in some
detail when we state them in a chronological order.
It may be mentioned, meanwhile, that the Dalmia Cement Ltd., hereinafter called
the appellant, owned certain cement factories and it placed an order
for the supply of four complete units of cement manufacturing nwchinery with M/s F.L. Smidth and Co., Copenhagen, on . February 7,
1946, to increase the production in the following factori.es,-
1. Shantinagar,
2. Dandot,.
3. balmianagar,
4. Daimiapuram ..
Since the factory in Dandot fell within the territory of Pakistan Qn its
con:>titntion with effect from August 15, 1947, the appellant transferred
tl)e m<ichinery which· was meant for the Dandot factory (hereinafter
referred a:> the Dandot machinery), to a new company known as Orissa
Cement Ltd. some time in 1950-51, and charged only the invoice
nri~e.w.fuio:h it had paid to M/s.F. L. Smidth and. Co:
The appellant
thereaf:tt>r asked- .for a ·higher price and after some negotiations the
Ori~sa Cement Ltd. agreed on December 4, 1951, to pay a further
&lJl11. vf Rs. 7. J:;ikh6; in lieu of which 70,000 fully paid up ordinary
s;hares -of.Rs. 1-0 /- each. were given to the appellant in that company.
The Incomc-ta.x Officer treated that amount as income earned bv the
appe]lant pvrsuant to an adventure in the nature of ti·ade in 1952-53
asscssmei1( year, ·and taxed it as sucl1.
On appeal, the Assistant
4-I234SCI/76
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556
SUPREME COURT REPORTS
[1977] 1 S.C.R.
Appellate Commissioner also held in his order dated September 16,
1958 that the transfer of the Dandot machinery was an adventure in
ithe nature of trade and the payment of Rs. 7 lakhs was a revenue
receipt which was rightly taxed by the Income-tax Officer.
The
matter went up in appeal to the Income-tax Appellate Tribunal (Delhi
Bench) which remanded the case to the Income-tax Officer by its order
dated September 13, 1960, for report on certain specific points. On
receipt of the Income-tax Officer's report, the Tribunal held that the
transaction in question was "certainly an adventure in the nature o~
trade" and dismissed the appeal.
It however drew up a statement
of the case, and that is how the aforesaid question of law was referred
to the High Court under section 66(1) of the Act.
The High Court
held that by the time the appellant placed the despatch order with
M/s Smidth & Co., "its intention was to purchase it with an idea to
resell" and that the fact that it was a single and isolated transaction
did not materially affect the case.
In reaching that conclusion the
High Court took tl1e subsequent developments into consideration, and
rejected the contention that the machinery was purchased by way of
an "investment". The present appeal has been filed against that judgment of the High Court dated April 28, 1970.
Under section 10 of the Act, income-tax is payable by an assessee
under the head "Profits and gains of business, profession or vocation",
inter alia, in respect of the profits and gains of any "business" carried
on by him, and the controversy in this case is whether the receipt of
-the additional sum of Rs. 7 lakhs, over and above the cost of the
Bandot machinery, could be said to arise out of any "business" of the
appellant. The term "business" has been defined as follows in clause
( 4) of section 2 of the Act,-
" ( 4) "business" includes any trade, commerce, or manufacture or any adventure or concern in the nature of trade,
commerce or manufacture."
The question in this case is whether the transaction was an "adventure"
in the "nature of trade" within the meaning of the definition? Some
decisions have been rendered by this Court on the point, and our
attention has been invited to the decisions in Narain Swadeshi Weaving
!Mills v. Commissioner of Excess Profits Tax,(') Kishan Prasad and
Co. Ltd. v. Commissioner of Income-tax Punjab,( 2 ) G. Venkataswami
Naidu & Co. v. The Commissioner of Income-tax,(') Soroj Kumar
Mazumdar v.
The Commissioner of Income-tax
West
Bengal
Calcutta,(")
and Janki Ram Bahadur Ram v. Commiss;oner
of Income-tax, Calcutta( 5 ). Even so, on general principle can, for
obvious reasons, be laid down to cover all cases of this kind because
of their varied nature, so that each case has to be decided on the basis
of its own facts and circumstances.
It is however well settled that
even a single and isolated transaction can be held to be capable of
falling within the definition if it bears clear indicia of trade ( vide Narain
(I) 26 I.T.R. 765.
(2) 27 I. T.R. 49.
(3) (1959] Supp. (!) S.C.R. 646.
(4) (1959) Supp... (2) S.C.R. 846.
(5) [1965] 3 S.C.R. 604.
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OALMJA CEMENT v. COMMISSIONER OF l.T. (Shing/wl, J.)
557
Swadeshi Weaving Mills v. Com111issio1ier of Excess Profits, G. VenkaA
taswami Naidu & Co. v. The Commissioner of Income-tax, and Saroj
Kumar Mazumdar v. The Commissioner of Income-tax, West Bengal,
Calcutta (supra) ) . It is equally well settled that the fact that t~e
transaction is not in the way or business of the assessee does not Ill
any way alter the character of the transaction (vide G. Venkataswami
Naidu & Co. v. The Commissioner of Income-tax, and Saroj Kumar
Mazumdar v. The Commissioner of Income-tax, West Bengal, Calcutta
B
(supra).
It would not therefore help the appellant's case merely to
urge either of these points for the answer to the question will depend
on a consideration of all the facts and circumstances.
· The question under consideration is essentially a mixed question
of fact and law. It will therefore be desirable, in the first instance,
to re-state the relevant facts in a chronological order;
As has been stated, the appellant owned some cement factories in
various parts of India including the one in Dandot.
It placed an
order with M/s. Smidth & Co., Copenhagen, for the supply of four
complete units of machinery for the manufacture of cement, to increase
the production of its factory at Dandot and three other factories.
A
firm order for all the four units was placed on February 7, 1946. It
was confirmed by M/s. F. L. Smidth & Company on August 6, 1947
and the appellant was informed that the supply of the Dandot machinery
would be made in various months from February 1948 to October
1948.
India was partitioned, and Pakistan came into existence on
August 15, 1947. Dandot fell in the territory of Pakistan. Tne appellant, which was an Indian Company, did not however cancel the order
in respect of the Dandot machinery.
On the other hand, a Director
of the appellant informed the Orissa Government in his letter dated
November 25, 1947 that it had "got a cement plant for which it had
placed order a couple of years back", of which early delivery was
expected, and that it would be willing to put it in Orissa on "suitable
terms."
The appellant's General Manager held discussions with the
Orissa Government on January 8, 1948 for the setting up of a cement
factory in Orissa. It was recorded in the note of the proceedings of
that meeting that the appellant had ordered machinery for replacing
its cement plant, the said machinery was expected to be shipped at
an early date and parts of it would start arriving in March 1949. It
was further stated that the complete supply of the plant was estimated
to take about six months, and if the negotiations were fruitful the first
lot of cement would be produced by the beginning of 1950.
The
appellant's representative insisted that a final decision might be taken
at an early date so that the machinery which had to be chippcc.l. from
abroad could be diverted, depending upon the decision, to the Calcutta
or Bombay port. The appellant thereafter wrote a letter to M/s. F. L.
Smidth and Co. (Bombay) Ltd. on September 9, 1948 directing that
the plant meant for the Dandot works might be diverted to Orissa.
It was specially stated in the letter as follows,-
"There are certain equipmentS in the specifications of the
plants for extension No. 3 and 4, which were peculiar to the
layout and design for the extension at Dandot and Shantic
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SUPREME COURT REPORTS
ll977] 1 s.c.n.
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nagar and they will not now fit in exactly in the same manner
in our proposed new factories.
As such, it is essential that
the whole.specifications are carefully scrutinised and manufacture of the items which ar_e peculiar to the Jay out of Dandot
and S)lantinagar Works only should be kept in abeyance in
order to _suit the local conditions." ·
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The plants were expected to arrive from March 1949 onwards, but this
would not have been possible without an import licence. The appellant
obtained the licence from the Government of fndia and intimated to
M/s. F. L. Smidth and Co. in its letter dated August 2, 1948 that it
had been permitted to import in the Indian Dominion the two plants
meant for Dandot and Shantinagar. The suppliers were accordingly
requested to intimate the dates upto which extension was require-el for
the import of the machinery. A formal agreement was made between
the appellant and the Orissa Govermnent on December 23, 1948. The
Dandot machinery arrived in due course.
It was delivered by the
appeilant to Orissa Cement Ltd. and its actual cost was debited to it.
Quite some time thereafter, on April 7, 1970, a Director of the appelfant wrote a Jetter to the Industries Minister of the Orissa Government
that the machinery supplied to the Orissa Cement Ltd. should be revalued and the appellant allowed a higher price than the invoice price
due to a rise in the cost of the cement plant at the time of supply
as compared with the price at the time when it was originally ordered
by the appellant.
The name of one F. B. Mogensen was suggested
for the revaluation of the machinery. This was agreed to by the State
Government on June 4, 1950.
Mogensen reported that the Orissa
Cement Ltd, had benefited to the extent of almost Rs. 21 lakhs
in
the bargain. The Orissa Government passed a resolution dated December 4, 1951 allowing a further sum of Rs. 7 lakhs to the appellant and,
ill lieu of cash payment, allotted 70,000 fully paid up ordinary shares
<?f Rs.. 10/- each of the Orissa Cement Ltd. to the appellant. ·
The above fl.\CtS clearly establish that,-
( i) Even though the appellant initially placed an order on
February 7, 1948 for the purchase of the Dandot Machinery for improving the production in the Dandot factory,
and the supply was not to commence until February, 1948,
it did not make any effort to cancel that order even after
Dandot was included in the territory of Pakistan with effect
from August 15, 1947.
(ii) On the other hand, in pursuance of an enquiry by the
Government of Orissa whether the appellant would be
interested in putting up a cement plant in the State, one
of the appellant's Directors informed the State Government
on November 25, 1947 that it had got a cement plant for
which it had placed an order a couple of years ago and
that it .could be put up in Orisrn on su,itable terms.
The
appellant's General Mam1ger in fact met the.State Govern-
. ment authorities in January, 1948 where it was reiterated
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OALMIA CEMENT v. COMMISSIONER OF J.T. (Shinghal, !.)
559
(iii)
that the machinery order¢ by the appellant was expected
to start arriving in March 1949 and could be diverted to
Calcutta and that if the appellant's negotiations with the
State Government were successful, the first lot of cement
could be supplied by the beginning of 1950.
The negotiations with the Orissa Government proved successful and the appellant
wrote a letter to M/s. F. L.
Smidth and Co. on August 2, 1948 informing it that it
had obtained the permission of the Government of India
to import the I)andot machinery in India. The appellant
also informed the suppliers on September 9, 1948 that it
should divert the Dandot machinery to Orissa and supply
the same according to the revised specifications to suit the
local conditions.
·
(iv) A formal agreement was executed by the appellant and
the Orissa Government on December 23, 1948 for the
setting up of a cement factory· in Orissa.
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( v) The Dandot machinery arrived and was supplied by the
appellant to the Orissa factory against cost price, which was
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debited to the Orissa Cement Company.
It would thus appear that, long before the Dandot machinery was
due, the appellant knew that it could not be used in Dandot. It bas
been found that after the partition cif the country the appellant could
have cancelled the order for the import of the machinery but it did
not do so and decided to import it with a view to supplying it to Orissa
E
on suitable terms. It therefore resold it to the Orissa factory in accordance with the terms and conditions of its negotiations with the State
Government. The intention of resale was therefore there almost from
the beginning, and was really the dominant intention in importing the
machinery after the partition of the country.
It is also quite clear
that the appellant was not inclined to make it a gratuitous sale, but
agreed to it only when it was able to secure a suitable agreement with
F
the State Government for the setting up of a factory in Orissa. It
was in fact the appellant's own case that the price of the Dandot
machinery had gone up substantially. Even so, the appellant did not
care to utilise it for any of its own plants, but sold it to Orissa Cement
Ltd. The appellant therefore did not only have the dominant intention
of selling the Dandot machinery to its own advantage but, in doing
so, it acted with the set purpose of taking an advantage of its position
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as the owner of the imported machinery of which the price had, on
the appellant's· own showing, gone up much higher. It was therefore
a real transaction by way of an adventure in the nature of trade and
was as such a business transaction within the meianing of section 2 ( 4)
of the Act.
It does not matter if the appellant did not earn a, pro.fit
immediately on delivering the machinery, and sold it without any profit
in the first instance, for there can be no denying the fact that even
H
if the appellant had not earned any profit whatsoever at the time of
the sale or even thereafter, the transaction in the facts and circum-
.stances of the case, would nonetheless have been adventure in the
560
SUPREME COURT REPORTS
[J 977J 1 S.C.R.
A
'·nature of trade" and no other.)
We are fortified in this view by the
decJS1ons in Narain Swadeshi Weaving Mills v. Commissioner Excess
Profits Tax (supra) and G. Venkataswami Naidu and Co. v. The Commissioner of Income-tax (supra).
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It is true that the question of asking for payment in excess of the
cost price was raised by the !appellant some time later, but its subsequent course of conduct in bringing about a substantial profit is a clear
pomter to the real intention behind the sale. It was for that reason
that the appellant's Director addressed a letter to the Minister of Industries of the Oris~ Government on April 7, 1950 stating that the Dandot
machinery should be revalued and the appellant allowed a higher price
due to the rise in its price at the time of the supply. The entire correspondence in that respect has not been placed on record by the
appellant, but it appears that the appellant was able to secure a further
sum of Rs. 7 lakhs, under an agreement dated December 4, 1951 in
lieu of which it was able to secure 70,000 fully paid up shares of Rs.
10/-. The appellant succeeded in doing so merely because it was able
to substantiate its claim for a higher price, or profit, on the role
ground that it was entitled to it because of the increase in the price at
the time of the sale. There is therefore nothing wrong in the view
which has prevailed with the High Court that it Was an adventure in
the nature of trade.
It has been argued by Mr. V. S. Desai, for the appellant that as it
was a single and isolated transaction of purchase and sale, the onus of
proving that it was a transaction in the nature of trade lay on the
department.
This is a correct proposition of law and, ,as would appear
from what has been stated above, we have examined the controversy
on the assumption that the burden of proving that the transaction was
an adventure in the nature of t$de lay on the department. The ancillary argument of Mr. V. S. Desai that a question like the present has
to be examined with reference to the indicia or characteristics of the
trade, is also quite correct, but counsel has not been able to contend,
in the face of the facts and circumstances mentioned above, which
indicia or characteristics could be said to be lacking to take it out of
the category of an adventure in the nature of trade.
All that Mr. V. S. Desai has pointed out is that there was no intention to make a profit when the Dandot machinery was sold to the
Orissa Cement Ltd., and it has been :urged tha~ would
~ §nfficient
to take it out of the category of an adventure in the nature of trade.
Reference in this connection has been made to the decisions in Kishan
Prasad & Co. Ltd. v. Commissioner of Income-tax, Punjab (supra),
G. Venkataswami Naidu and Co. v. The Commissioner of Income-tax
(supra), Saroj Kumar Mazumdar v. Th~ Commissioner of Income-ta.x,
West Bengal, Calcutta (supna), and A1ax Products Ltd. v. Commissioner of Income-tax, Madras(').
We have given our reasons for the
contrary view that the transaction would be an adventure in the. nature
of trade even if the question of profit was left out of consideration, and
that the appellant in fact acted with the set purpose of reselling the
(1) 43 T.T.R. 297
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DALMIA CEMENT v. COMMISSIONER OF I.T. (Shinghal, J.)
561
Dandot machinery to its advantage and not by way of a favour or a' A
gratuitous act.
We have also shown how the appellant ultimately
claimed and succeeded in securing ;a higher price merely on the ground
that there was an appreciable increase in the price after the purchase
of the Dandot machinery.
Lastly, it has been argued by Mr. V. S. Desai that in purchasing
the machinery the ,appellant made a capital investment so that it was
merely a capital asset.
This argument is also futile for, as has been
shown, the appellant made the purchase with the do~t intention ~f
reselling the machinery to advantage and made the resale only when it
was able to enter into an agreement with the Orissa Government for the
setting of a cement factory in that state on terms and conditions which
were suitable from its point of view: It may also be stated that even
in its own profit and loss account and balance sheet, the appellant
treated the sale price as a revenue receipt and not as a capital investment. It was therefore an after thought to Claim that the initial purchase was by way of an investment and W:as a capital asset.
The facts of Kishan Prasad and Co. Ltd. v. The Commissioner of
Income-tax, Punjab (supra), Saroj Kumar Mazumdar v. The Commissioner of IncomMax, West Bengal, Calcutta (supra) and Janki Ram
Bahadur Ram v. Commissioner of Income-tax, Calcutta
(supra)
referred to by Mr. V. S. Desai were different. In the case of Kishan
Prasad and Co. Ltd. (supra) there was agreement to give tlie managing agency to tlie assessee on the erection of tlie mill because it had
subscribed to shares worth Rs. 2 lakhs.
The mill was not erected and
the assessees sold the shares.
There was tlierefore justification for
holding ~t tlie purchase of the shares was an investment to acquire
the managing agency and was not an adventure in the nature of trade.
In Saroj Kumar Mazumdar's case (supra) there was a single transaction of siale of rights for the purchase of land measuring t acres by tlic
assessee who was an Engineer by profession.
His construction activities declined and that was why he sold his rights in the land for
Rs. 74,000 odd in excess of the amount paid by him.
The Incometax department however failed to prove that tlie assessee's dominant
intention was to embark on a venture in the nature of trade as distinguished from capital investment.
That was also tlierefore a different
case.
In the case of lanki Ram Bahadur Ram (supra) tlie assessee
was a dealer in iron scrap and hardware.
He agreed to purchase all
rights of a company in a jute pressing factory, but sold it at a profl.t.
It was held that as tlie property purchased by the assessee was not such
that an inference that a venture in the nature of trade must have been
intended could be raised. the profit was not liable to tax. It was held
that a person purchasing a jute press might intend to start his own
business or he might let it out on favourable terms.
The property was
in fract let out by the earlier owner before tlie date of sale.
That was
also therefore quite a defferent case and cannot avail the appellant. In
the remaining case of Ajlll~ Products Ltd. (supra) it was held that on
the facts the assessee company having acquired the sick mill to open a·
'new line of bus.iness, the purchase was, really in the nature of an
investment and the purchase and sale did not amount to an adventure
in the nature of trade. That was therefore also quite a different case.
B
c
D
E
F
G
H
A
8
5 6.2
SUPREME COURT REPORTS
(1977] 1 S.C.R.
It would thus appear that in spite of the fact that the appellant withheld some of the correspondence bearing on the controversy, the
Department has succeeded in proving that the transaction of sale in
,question was an adventure in the nature of trade and fall within the
definition of "business" in clause ( 4) of section 2 of the Act.
The
High Court has rightly answered the question in the affinnative, and as
we find no merit in this appeal, it is dismissed wnh costs.
M.R.
Appear dismissed.
•