# • I S.C.R. ·suPREME COURT REPORTS M/s. RAJPUTANA TEXTILES (AGENCIES) LTD v. THE COMMISSIONER OF INCOME-TAX, BOMBAY CITY

- **Citation:** [1962] 1 S.C.R. 917
- **Court:** Supreme Court of India
- **Decided:** 1962
- **Case number:** Civil Appeal No. 282 of 1955
- **Bench:** S. K. Das, J. L. Kapur, M. Hidayatullah, J.C. Shah, T. L. Venkatarama Aiyar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/i-s-c-r-supreme-court-reports-m-s-rajputana-textiles-agencies-ltd-v-the-2109
- **Pages:** 13

## Headnote

Income Tax-Business transaction-Whether adventure in the
nature of trade-Intention of the assessee-Pro.fits-Whether revenue
or capital receipt-Advisory jurisdiction-Points not taken before
High Court-Whether could be raised before the Supreme CourtTaxation on Income (Investigation Commission) Act, r947 (30 of
r947), s. 8(5).
The assessee company was promoted with .the idea of
obtaining the Managing Agency of the Appollo Mills from
M/s. Sassoon & Co., Ltd., who were holding 19,76,000 shares out
of a total of 25 lakhs shares of Rs. 2 each. According to the
agreement the assessee company had to take the whole of the
block of shares belonging to the Sassoons and pay at Rs. 4-4-0
per share Rs. 12} lakhs for the managing agency. As the
assessee company had only Rs. 20 lakhs as its paid up capital, it
was necessary to sell 13 lakhs odd shares in order to pay off the
Sassoons both for the Managing Agency and the shares. Therefore during the course of negotiations the promoters of the
assessee company entered into an agreement with some brokers
for the sale of Rs. 19,76,000 shares. As a result of the .sale of
shares the assessee company received a sum of Rs. 16,52,600 as
excess over the purchase price which amount on taxation was
. held bv the Income-tax Officer not to be profits and therefore
not taxable. The case of the 'assessee company was referred to
the Investigation Commission. The Commission found that it
was not the intention of the assessee company to retain the
whole block of shares and that the sale of 13 lakhs odd shares
was an adventure in the nature of trade, and directed that
appropriate assessment be made, under the Indian Income-tax
Act and Excess Profits Tax Act. At the instance of the assessee
company the question was referred to the High Court under
s. 8(5) of the Taxation on Income (Investigation Commission)
Act, 1947, which held that there were materials to justify the
finding of the Commission that the purchase and sale of about
13 lakhs odd shares was an adventure in the nature ot trade.
An appeal was taken to the Supreme Court against this order.
Held, that in considering the question whether the transaction was or was not an adventure in the nature of trade, the
court had to take into consideration the intention of the assessee
April rz.
918
SUPREME COURT REPORTS"
[1962]
z96z
keeping in view the "legal requirements which are associated
with the concept of trade or business".
Rajputana
In the present case, the transaction that consisted of buyTextiles
ing the managing agency of the Mill Company and the block of
(Agencies) Ltd. shares held by .Sassoons was inescapably one of a commercial
v.
nature and had all the attributes of an adventure in the nature
Cotnmissioner of of trade.
Income-ta~,
Held, further, that the jurisdiction which this Court would
Bombay City
exercise in appeal was of the same character that a High Court
would exercise. Thus the question under Art. 14 of the Constitution could not be raised in these proceedings because this
Court like the High Court was exercising its advisory j urisdiction and its power was confined to the question which arose
before the High Court.
Kapur J.
M/s. Ramnarain Sons (Pr.) Ltd. v. Commissioner of Incometax, Bombay, [1961] 2 S.C.R. 904, Tata Hydro-Electric Agencies,
Bombay v. The Commissioner of Income-tax, Bombay Presidency
& Aden, (1937) L.R. 64 I.A. 215, Commissioner of Income-tax,
Central and United Provinces, Lucknow v. M/s. Motiram Nandram,
(1939) L.R. 67 I.A. 71, Jonesv.Leeming, [1930] A.C. 415, Commissioner of Inland Revenue v. Reinhold, (1953) 34 T.C. 389 and
Saroj Kumar Mazumdar v. Commissioner of Income-tax, West
Bengal, Calcutta, [1959] Supp. 2 S.C.R. 846, distinguished.
Kishan Prasad & Co. v. Commissioner of Income-tax, Punjab,
[1955] 27 I.T.R. 49, Edwards v. Bairstow, [1956] A.C. 14 and
G. Venkataswami Naidu & Co. v. The Commissioner of Income-tax,
[1959] Supp. l S.C.R. 646, discussed.
CIVIL
APPELLATE
JURISDICTION:
Civil
Appeal
No. 282 of 1955.
Appe

## Text

-
•
I S.C.R. ·suPREME COURT REPORTS
M/s. RAJPUTANA TEXTILES
(AGENCIES) LTD.
v.
THE COMMISSIONER OF INCOME-TAX,
BOMBAY CITY
917
(S. K. DAS, J. L. KAPUR, M. HIDAYATULLAH,
J.C. SHAH and T. L. VENKATARAMA AIYAR, JJ.)
Income Tax-Business transaction-Whether adventure in the
nature of trade-Intention of the assessee-Pro.fits-Whether revenue
or capital receipt-Advisory jurisdiction-Points not taken before
High Court-Whether could be raised before the Supreme CourtTaxation on Income (Investigation Commission) Act, r947 (30 of
r947), s. 8(5).
The assessee company was promoted with .the idea of
obtaining the Managing Agency of the Appollo Mills from
M/s. Sassoon & Co., Ltd., who were holding 19,76,000 shares out
of a total of 25 lakhs shares of Rs. 2 each. According to the
agreement the assessee company had to take the whole of the
block of shares belonging to the Sassoons and pay at Rs. 4-4-0
per share Rs. 12} lakhs for the managing agency. As the
assessee company had only Rs. 20 lakhs as its paid up capital, it
was necessary to sell 13 lakhs odd shares in order to pay off the
Sassoons both for the Managing Agency and the shares. Therefore during the course of negotiations the promoters of the
assessee company entered into an agreement with some brokers
for the sale of Rs. 19,76,000 shares. As a result of the .sale of
shares the assessee company received a sum of Rs. 16,52,600 as
excess over the purchase price which amount on taxation was
. held bv the Income-tax Officer not to be profits and therefore
not taxable. The case of the 'assessee company was referred to
the Investigation Commission. The Commission found that it
was not the intention of the assessee company to retain the
whole block of shares and that the sale of 13 lakhs odd shares
was an adventure in the nature of trade, and directed that
appropriate assessment be made, under the Indian Income-tax
Act and Excess Profits Tax Act. At the instance of the assessee
company the question was referred to the High Court under
s. 8(5) of the Taxation on Income (Investigation Commission)
Act, 1947, which held that there were materials to justify the
finding of the Commission that the purchase and sale of about
13 lakhs odd shares was an adventure in the nature ot trade.
An appeal was taken to the Supreme Court against this order.
Held, that in considering the question whether the transaction was or was not an adventure in the nature of trade, the
court had to take into consideration the intention of the assessee
April rz.
918
SUPREME COURT REPORTS"
[1962]
z96z
keeping in view the "legal requirements which are associated
with the concept of trade or business".
Rajputana
In the present case, the transaction that consisted of buyTextiles
ing the managing agency of the Mill Company and the block of
(Agencies) Ltd. shares held by .Sassoons was inescapably one of a commercial
v.
nature and had all the attributes of an adventure in the nature
Cotnmissioner of of trade.
Income-ta~,
Held, further, that the jurisdiction which this Court would
Bombay City
exercise in appeal was of the same character that a High Court
would exercise. Thus the question under Art. 14 of the Constitution could not be raised in these proceedings because this
Court like the High Court was exercising its advisory j urisdiction and its power was confined to the question which arose
before the High Court.
Kapur J.
M/s. Ramnarain Sons (Pr.) Ltd. v. Commissioner of Incometax, Bombay, [1961] 2 S.C.R. 904, Tata Hydro-Electric Agencies,
Bombay v. The Commissioner of Income-tax, Bombay Presidency
& Aden, (1937) L.R. 64 I.A. 215, Commissioner of Income-tax,
Central and United Provinces, Lucknow v. M/s. Motiram Nandram,
(1939) L.R. 67 I.A. 71, Jonesv.Leeming, [1930] A.C. 415, Commissioner of Inland Revenue v. Reinhold, (1953) 34 T.C. 389 and
Saroj Kumar Mazumdar v. Commissioner of Income-tax, West
Bengal, Calcutta, [1959] Supp. 2 S.C.R. 846, distinguished.
Kishan Prasad & Co. v. Commissioner of Income-tax, Punjab,
[1955] 27 I.T.R. 49, Edwards v. Bairstow, [1956] A.C. 14 and
G. Venkataswami Naidu & Co. v. The Commissioner of Income-tax,
[1959] Supp. l S.C.R. 646, discussed.
CIVIL
APPELLATE
JURISDICTION:
Civil
Appeal
No. 282 of 1955.
Appeal by special leave from the judgment and
order dated March 20, 1953, of the Bombay High.
Court in Income-tax Reference No. 31 of 1951.
A. V. Viswanatha Sastri and J. N. Shroff, for the
appellants.
K. N. Rajagopal Sastri and D. Gupta, for the respondent.
1
'
1961. April 12.
The Judgment of the Court was
delivered by
KAPUR, J.-This is an appeal against the judgment
and order of the High Court of Bombay in a reference
under s. 8(5) of the Taxation on Income (Investigation
Commission) Act, 194 7 (Act XXX of 194 7), hereinafter
termed the 'Act'.
The assessee company was· the
applicant before the High Court arid iS' the appellant
•
•
,,,...,
1 S.C.R. SUPREME COURT REPORTS
919
..
before us and the Commissioner of Income-tax, Born.
'96'
bay City, was the respondent in the High Court and
Rajputana
is the respondent here also.
Being a reference under
Textiles
s. 8(5) of the Act, it was heard and decided by three !Agencies) Ltd.
judges of the High Court.
v.
The assessee company is a private limited com- Commissioner of
h. h
.
t d
M
6 1943
"th
Income-tax
pany w IC was mcorpora e
on
ay ,
, WI
B
b
c· ·
a paid up capital of Rs. 20 lacs. It was promoted by
om ay ''Y
two groups of persons who for the sake of convenience
Kapur f.
may be called the 'Morarka Group' and the 'Bubna
Group'. The Apollo Mills Co., Ltd. of Bombay with
a capital of Rs. 50 lacs divided into 25 lacs shares of
Rs. 2 each, had as its Managing Agents M/s. E. D.
Sassoon & Co. Ltd., who for the sake of brevity, will
be referred to in this judgment as 'the Sassoons'. They
held 19,76,000 shares out of the 25 lacs. The promoters of the assessee company entered into an agreement with the Sassoons on April 27, 1943, by which
the Sassoons agreed to transfer their Managing Agency
in the Mill Co. for Rs. 12! lacs to the promoters of
the assessee company and the whole of their holding
of 19, 76,000 shares at Rs. 4-4-0 per share, i.e., for
Rs. 83,98,000.
These shares were to be transferred to
the promoters or to the company which they were
proposing to float.
By clause (3) of this agreement
the sale of the Managing Agency and the transfer of
the shares was to be simultaneously completed and
neither party could require the completion of the one
without the other. On November 1, 1943, a tripartite
agreement was entered into between the Sassoons as
Assignors, the promoters of the company as Confirming Parties and the assessee company as Assignees.
By that agreement the· Managing Agency rights were
formally transferred to the assessee company so also
the Share Certificates for the whole of holding of the
Sassoons in the Mill Co. and the necessary blank
transfer deeds were delivered.
,
Before the agreement of April 27, 1943, and during
the course of negotiations with the Sassoons the promoters of the assessee company entered into an
arrangement with some share brokers for the sale of
a large portion of the total holding of 19, 76,000 shares
920
SUPREME. COURT REPORTS
[1962]
'96'
of the Mill Co.
The price of these shares varied from
Rs. 5-8-0 to Rs. 5-13-0. In all l0,00,000 shares out of
Rajputana
Te>tites
the total holding of the Mill Co. were sold to these
(Agencies) Ltd. brokers and they in turn sold these block of shares in
v.
smaller lots to a number of purchasers. Some shares
Commissioner of were sold later; 1,20,000 shares were transferred to 13
Income-tax,
nominees of the Morarka Group at cost price.
As a
Bombay City
result of sale of all these 13,74,000 shares the assessee
Kapur J.
company received a sum of Rs. 16,52,600 as excess
over the purchase price. The remaining shares the
assessee company retained. The assessee company
submitted that the profits of the entire holding of the
shares had not been worked out and had therefore
not been transferred to the profit and loss account.
The assessee company was taxed by the Incometax Officer but the sum of Rs. 16,52,600 which was
the excess of the sale price over the purchase price of
13,74,000 shares was held not to be profit and therefore not taxable. When the Act came into force the
case of the assessee company was referred to the Investigation Commission by the Central Government
and the Investigation Commission made its report on
November 9, 1949, in Case No. 406A.
By this report
the Commission directed that appropriate assessment
be made under the Indian Income tax Act for the
assessment year 1945-46 and the Excess Profits Tax
Act for the corresponding chargeable accounting
period.
At the instance of the assessee company the Commissioner of Income-tax, Bombay City, by his order
dated May 1, 1951, referred the following question to
the High Court:
"Whether on the facts found by the Commission
the sum of Rs. 16,52,600 being the excess price realised by the sale of 13, 7 4,000 shares of the Mill
Company, was 'profit' and as such taxable or whether it was either of the nature of a ca,pital appreciation or a casual and non-recurring receipt and as
such exempt from taxation under Section 4(3)(vii)
of the Income-tax Act."
The High Court reformulated the question as
follows:-
/
-
I
•
-
...
•
1 S.C.R. SUPREME COURT ,REPORTS
921
"Whether there were materials to jnsti fy the
finding of the Tribunal that the trans:1ctiun of purchase and sale of 13, 74,000 shares was an adventure
in the nature of trade?"
and answered the question so formulated in the
affirmative and therefore against the assessee company. In its application for reference under s. 8(5) of
the Act the assessee company wanted S<>me other
questions also to be referred but the Investigation
Commission only referred the question which has been
set out above. The assessee company therefore took
out a Notice of Motion on November 8, 1952, which
was dismissed by the High Court on the ground that
either the questions which were sought to be raised
did not arise out of the finding of the Commission or
they were included in the question which had been
referred and answered by the High Court. Although
the High Court did not so hold, the Notice of Motion
was barred by time, being filed after more than six
months allowed under s. 66{2) of the Indian Incometax Act.
Against this judgment and order of the
High Court the assessee compa,ny has come in appeal
to this Court by special leave.
This appeal is brought against the judgment of the
High Court answering the question referred and therefore in its advisory jurisdiction.
The jurisdiction
which this Court exercises in appeal is of the same
character and therefore any question which was not
referred to the High Court cannot be allowed to be
raised at this stage. Consequently the constitutional
question in regard to discrimination nuder Art. 14 of
the Constitution which is now sought to be raised
cannot be raised. The main question which wnuld
then survive for decision is the nature of transaction
relating to the sale of 13 lacs odd shan's and whether
or not the sale was an aclventure in the nature of
trade and therefore the amount of Rs. 16,52,600 the
excess of sale price over the purchas~ price of 'he
share is a Revenue Receipt and thl'refore taxable profits or is it a Capital Receipt and therefore not liable
to tax. The Investigation Commission by their order
dated May 1, 1949, found;-
n6
Rajputa11a
TexJiltJs
(Agen'i") Ltd.
v.
Commissioner of
I nconitJ-fax.
Bombay City
T<apu,. J.
922
SUPREME COURT REPOltTS
[1962]
196r
(1) that a distinction should be made between the
6 lacs shares which the assessee company intended to
Rajputana
and did reta.in and the 13 lacs odd shares which it
Textiles
(Agencies) Ltd. intended to and did sell; the former was kept in order
v.
to enable the a~sessee company to make their ManagCommissioner of ing Agency rights effective.
Income-tax.
(2) During the negotiations between the Sassoons
Bombay City and the promoters of the assessee company, the proKapur J.
rooters of the assessee company had started negotiations with certain brokers for the transfer of 13 lacs
odd shares soon after the arrangement between the
Sassoons and the assessee company was completed.
(3) From the very beginning the intention of the
promoters of the assessee company was to sell all the
13 lacs odd shares and in pursuance thereof they were
sold.
(4) The paid up capital of the assessee company
was Rs. 20 lacs only and according to the agreement
they had to take the whole block of shares belonging
to the Sassoons and pay for the shares as well as for
the Managing Agency both of which were separately
valued in the agreement. It was therefore necessary
and it was intended to sell the 13 lacs odd shares in
.order to pay off the Sassoons both for the Managing
Agency and the shares. The inference drawn from
this by the Commission was that a distinction had
to be drawn between the 6 lacs shares which the
assessee company intended to retain and did in fact
retain and the 13 lacs odd shares which they intended to sell and did sell.
(5) that the intention to sell which the assessee
company entertained from the very outset was a com.
plete answer to the argument that the acquisition
was in the nature of an investment. In giving its
finding the Commission said:-
" Aggregating the 12! lakhs paid for the Managing Agency right and the full price of 6 lakhs and
odd shares at Rs. 4-4-0 per share, the capital investment must amount to 12! lakhs and 25! lakhs, i.e.,
38 lacs and odd.
By deducting therefrom the profits of Rs. 16,52,600, the Company showed a capital
investment of Rs. 21,54,200 and with the addition
1 S.C.R. SUPREME COURT REPORTS
923
of a few sundry items, it was brought up to
Rs. 22,06,408 (see para 7 supra)."
From this finding the inference drawn by the Commission was that the sale of 13 lacs odd shares was an
adventure in the nature of trade.
The High Court reformulated the question which
has already been quoted and it was contended that
the High Court was in error in narrowing down the
scope of the question referred by the Commission. It
is not necessary to adjudicate upon this argument
because in our opinion taking the question as referred
to be a proper question arising out of the report of the
Investigation Commission the answer to the first part
thereof would still be in the affirmative. In considering the question whether the transaction is or is not
an adventure in the nature of trade we have to take
into consideration the intention of the assessee keeping in view the "legal requirements which are associated with the concept of trade or business''.
The
inference from the facts found by the Investigation
Commission, i.e., whether the assessee company's
transaction in purchasing and selling 13 lacs odd
shares -is or is not an adventure in the nature of trade
is a mixed question of law and fact and the legal
effect of the facts found by the Investigation Tribunal
is a question of law.
See M/s. Ramnarain Sons (Pr.)
Ltd. v. Commissioner of Income-tax, Bombay (1).
It was argued on behalf of the assessee comp:1I1y
that:
(1) that the dominant idea with which the whole
transaction was entered into was to obtain the Managing Agency of the Apollo Mills;
(2) that the assessee company was forced to buy
the whole block of shares, i.e., 19,76,000 shares by the
Sassoons because they were not prepared to part with
the Managing Agency without the whole of their stock
in the mill company;
(3) that as the assessee company did not not have
sufficient amount of money, their capital being only
Rs. 20 lacs, it was to implement the tripartite agreement dated November 1, 1943, that the sale was
made; and
(1) [1961] 2 S.C.R. 9% 908.
r96r
Rajputana
Textiles
(Agencies} Ltd.
V,
Commissionef of
Income-tax,
Bombay City
Kapur ].
924
SUPREME COURT REPORTS
[1962]
\ '
1961
(4) that the Memorandum of Association of the
assessee company showed that it was a holding comRajputana
d d
l"
·
h
f ·
TeXWes
pany an
ea mg m s ares was not one o its
(Agencie;) Ltd. objects.
v.
The agreement shows that the Sassoons had sepaCommissioner of rately evaluated the Managing Agency and the shares
Income-ta•,
held in the Apollo Mills Co.
As the Investigation
Bombay City
C
· •
h
c
d "t
th · t
·
f
omm1ss10n as ,oun , 1 was never . e m ont10n o
Kapnr ;.
the assessee company to retain the whole block of
shares. Before the agreement was entered into they
had made arrangement for the sa.]e of the bulk of
shares which were to be transferred by the Sassoons
and therefore division of the shares into two sets w1ts
made by the promoters of the assessee company and
the assessee company themselves and was not the
result of anything done by the Investigation Commission.
In support of his contention that the amount of
Rs. 16,52,600 was in the nature of Capital Receipt,
reliance was placed on the judgment of this Court in
M/s. Ramnarain's case (1) but there are certain features
and details which distinguish that case from the present case. It was held in that case that the question
had to be decided in the light of the intention of the
assessee and the assessee in that case had purchased
the shares of the Dawn Mills not as a business transaction. That was clear from the fact that the assessee had purchased the shares at Rs. 2,321-8-0 per share
and the market price was only Rs. 1,610, and the purpose of acquisition of such a large block of shares at
a price exceeding the market price by a million rupees
was the acquisition of the Managing Agency, which
yielded the inference that the intention of purchasing
the shares in that case was not to acquire them as a
part of the trade of the assessee in shares but for
obtaining the Managing Agency of the Mills. There
was no separate price paid for the Managing Agency
and the shares purchased and the Managing Agency
acquired were both assets of a capital nature and the
shares did not constitute stock-in-trade of a trading
venture. In the present case the facts as shown were
entirely different.
(1) [1961] 2 S.C.R 904. 908.
~ . (
I ..
1 S.C.R. SUPREME COURT REPORTS
925 ·
Counsel for the assessee company also relied on
r96r
Kishan Prasad & Co. Ltd. v. Co]m· issioner of IncomeRajputana
tax, Punjab('). In that case th Managing Director
Textiles
of the company which was formed for the purpose of (Agencies) Ltd.
carrying on general business and trade of commercial
v.
undertaking and dealing in bills, hnndis and other Commi,,ioner 01
· ·
d · t
t
'th
Income-tax
secur1t1es, entere
m o an agreemen w1
a sugar
B
b
c·t·
d.
b
h' h h
b
'
h
om ay 'y
syn 1catc y w ic
t e company was to e given t e
Managing Agency of a Mill of the sugar syndicate
Hapur J.
when such mill was erected in lieu of the company
subscribing shares worth 3 lacs, and undertaking to
sell shares worth 2 lacs. It was further provided that
if the mill was not erected the assessee company was
to be paid a commission on the amount invested by
them. The Managing Director· died and the assessee
company sold the shares and thus received Rs. 2 lacs
more than they had expended. The question was
whether Rs. 2 lacs were receipts from business and
not a mere appreciation in capital. It was held that
that amount was not a result of an adventure in the
nature of trade but was merely the result of an investment. It was found as a fact that the object of the
company was merely to obtain the Managing Agency
of the mill which would have been an asset of an
enduring nature bringing profits but there was from
the very inception no intention on the part of the
company to resell the shares either at profit or otherwise. It appears that it was not contested that the
conclusion to be drawn from those facts was that the
investment in the purchase of shares iu the circumstances of the case of a capital nature and profits
arising therefrom were an accretion to the capital. In
that case the court was trying to find out the intention of the assessee (the company) and taking all the
circumstances into consideration it came to the conclusion that it was a case not of profits arising out
of an adventure in the nature of trade but the intention of the assessee company was to invest its monies
and therefore the excess arising out of sale of the
shares was an accretion to the capital. That case must
be taken to have been decided on its special facts as
(1) [1955) 27 I.T.R. 49·
926
SUPREME COURT REPOHTS
[1962]
r96r
indeed was the decision in M/s. Ramnarain Son's
case (1 ).
·:
Rajputana
C
l ,,
·
Textaes
ounse 1or the assessee company referred to other
(Agencies) Ltd. cases: Tata Hydro-Electric Agencies, Bombay v. The
v.
Commissioner of Income-tax, Bombay Presidency &
Commissioner of Aden ('); Commissioner of Income-tax, Central and
Income-tax,
United Provinces, Lucknow v. Messrs. Motira1n NandBombay City
ram ('),Jones v. Leeming (4) and Commissioner of InKapu' 1.
land Revenue v. Reinhold ('). It is unnecessary to review these cases in any detail because they are clearly
distinguishable in material respects and were decided
on their own special facts. In Tata Hydro-Electric
Agencies' case (') the question for decision was w hether 25% of the commission earned which was paid
to the two financiers was expenditure deductible
under s. 10(2)(ix) and it was held that it was not
because the obligation to make the payment was in
consideration of acquiring the Managing Agency and
the right to conduct business and not for the purpose
of producing profits in the conduct of business. Similarly in Commissioner of Income-tax v. Messrs. Motiram Nandram (')the expenditure was for securing the
agency which was to carry on business. Sir George
Rankin said at p. 81:
"The question in such a case as the present must
be "what is the object of the expenditure?" and it
must be answered from the standpoint of the assessees at the time they made it-that is, when they
were embarking upon the business of organizing
agents for the company."
Jones v. Leeming(') was a case of an isolated transaction. The finding was that it was not in the nature
of trade. Commissioner of Inland Revenue v. Reinhold(') was decided on its own facts.
Another case
decided by this court upon which counsel for the
appellant relied was Saroj Kumar Mazumdar v. Commissioner of Income-tax, West Bengal, Calcutta (6) but
that case was also decided on its own facts and it was
held that there was no clear evidence in support of
(r) (1961J 2 S.C.R. 904, qo8.
(Jl (1939) L.R. 67 I.A. 7I.
(5) (1953) 34 T.C. 389.
(2) (1937) L.R. 64 I.A. 215.
(4) [1930] A.C. 415.
(6) [1959] Supp. 2 S C,R. 846,
.. I
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>
1 s.c.R. SUPREME COURT REPORTS
~27
the inference of the Appellate Tribunal that the land
was purchased with the sole intention of selling it
later at a profit.
The English and Scottish cases on which the appellant relied were considered by the House of Lords in
Edwards v. Bairstow (1). In that case the assessees who
were the respondents embarked on a joint venture to
purchase and complete a spinning plant agreeing between themselves not to hold it but to make a quick
resale. With that object in view they approached and
there were diverse negotiations and the whole plant
wa"s sold in about two years' time at a profit of about
£ 18,000 and for that purpose incurred commission
for help in effecting sales, for insurance and other expenses. The General Commissioners found that it
was not an adventure in the nature of trade to justify
an assessment to income-tax under Case I of Schedule
D to the Income-tax Act, 1918. It was held that the
facts led inevitably, to the conclusion that the transaction was an adventure in the nature of trade and that
the Commissioner's inference to the contrary should
be set aside.
Counsel for the respondent next relied on a J udgment of this Court in G. Venkataswami Naidu & Co.
v. The Commissioner of Income-tax(') in which it was
held that the presence of all the relevant factors may
help the Court to draw the inference that the transaction is in the nature of trade but it is not a matter of
counting the number of facts and circumstances for
and against. What is important is to consider the
distinctive character and it is the total effect of all
the relevant factors that determines the character of
the transaction. All these cases are illustrative. As
was said by Gajendragadkar, J., in the above mentioned case the totality of circumstances of a case and the
pros and cons have to be considered and inference
drawn from those facts Whether a particular transaction was in the nature of trade or was merely an
investment and the resulting excess from the transaction was therefore profit which was taxable or was
merely an accretion to the capital. In the instant case
(1) [1956] A.C. 14.
Rajputana
Textiles
(Agencies) Ltd.
v.
Co1nmissioner of
Income-tax,
Bombay City
l<apur ] .
92S
SUPREME COURT REPORTS
[1962]
the profits from the transaction that consisted of buying the Managing Agency of the Mill Company and the
R7,~;i~:;a
block of shares held by the Sassoons were in our view
(Agencfrs) Ltd. the profits of an adventure in the nature of trade.
v.
The two groups, Morarka and Bubnas, put Rs. 20 lacs
Commissioner of into the assessee company which was floated for the
Income-ta~,
acquisition of the Managing Agency and shares of the
Bombay C•ty
Mill Company which were beyond the holding capaKapur ].
city of the assessee company. That company never
intended to hold the whole block of shares. It or its
promoters before even entering into the agreement of
purchase and during the course of negotiations for the
purchase had entered into arrangements with different brokers for the sale of shares or at least of a bulk
of those shares which were subsequently sold at a
profit and but for that sale the transaction could not
have been completed by the assessee company. The
purchase of shares was not with the intention of holding them, the intention of the assessee was just the
contrary and by the sale at a profit of the shares actually sold the assessee company expected to and did
finance the completion of the transaction and thus
was enabled to secure the Managing Agency and keep
6 lacs shares. This inescapably was a transaction of
a commercial nature. It had all the attributes of an
adventure in the nature of trade. The contention that
dealing in buying and selling of shares was not one
of its objects is without substance. The Investigatio;
Commission found that dealing in shares was within
the objects of the assessee company and this is one
circumstance in the totality of the circumstances
which must be considered, though by itself it is not
determinative of the question.
All the circumstances
lead to the inference which was rightly drawn by the
Investigation Commission and by the High Court.
The answer to the first part of the question referred
by the Investigation Commission must therefore be in
the affirmative.
It was contended that the question should not have
been reframed and we have therefore proceeded to
answer the question as framed by the Investigation
Commission. In our opinion the question even as
framed must be answered in the affirmative.
1 S.C.R. SUPREME COURT REPORTS
929
The Notice of Motion to raise other questions in
the High Court was rightly dismissed.
Apart from
the fact that the Notice of Motion was barred by time
and there was no application for condonation of delay,
the questions which were sought to be raised were
rightly held either to be covered by the question answered or they did not arise at all. The constitutional question under Art. 14 of the Constitution cannot
be raised in these proceedings because as we have said
above this Court is exercising its advisory jurisdiction
and its power is confined to the questions which arise
in an appeal.
This appeal must therefore be dismissed with costs.
Appeal dismissed.
GOBALD MOTOR SERVICE LTD. & ANOTHER
v.
R. M. K. VELUSW AMI & OTHERS
(K. SuBBA RAO, RAGHUBAR DAYAL and
J. R. MuDHOLKAR, JJ.)
Fatal Accidents-Negligent act of driver of bus-Acting in the
course of employment-Liability of owner-Damages-Principles
of ascertainment-Pecuniary loss and loss of expectation of life-If
same person could claim under both heads-Fatal Accidents Act,
r855 (IJ of r855), SS. I, 2.
A bus run by the appellant met with an accident as a result
of which R died. R's dependants and heirs e.g. the father,
widow and sons. brought a suit for compensation under s. I of
the Fatal Accidents Act, 1855, for loss of pecuniary benefit sustained by them personally and under s. 2 thereof for the loss
sustained by the estate on account of the death of R.
The
High Court found that the bus was driven at an excessive speed
and there was negligence on the part of the driver and that the
appellants were liable for the same. On the question of damages,
it confirmed the amount of compensation of Rs. 25,000 under s. 1
of the Act for the loss of pecuniary advantage and of Rs. 6,ooo
under s. 2 of the Act for loss of expectation of life. The questions for consideration were (r) whether the accident wa> due
117
1961
Rajputana
Textiles
(Agencies) Lid.
v.
Com,nissioner af
lncome~tax,
Bombay City
Kapur J.
z96r
April 14.