# KHAN BAHADUR AHMED ALLADIN & SONS v. COMMISSIONER OF INCOME-TAX, ANDHRA PRADESH

- **Citation:** [1968] 2 S.C.R. 439
- **Court:** Supreme Court of India
- **Decided:** 1967-11-24
- **Bench:** J. C. Shah, V. Ramaswami, V. Bhargava
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/khan-bahadur-ahmed-alladin-sons-v-commissioner-of-income-tax-andhra-pradesh-4219
- **Pages:** 11

## Headnote

Indian Income-tax Act, 1922, s. 2(4)-Adventure in the
nature of
trade--What is-Tests to determine-Question is mixed question of la»'
ond fact-Tribunaf s duty in preparing statement of case;
The assessee firm purchased a Brengun factory from the Government
of India and sold the stores and pan of the lands and buildings shortlv
afterwards at a higher price. It admitted before the Income-tax authorities that the purchase and sale in respect of the stores constituted an
adventure in the nature of trade, but in respect of the land and buildings
sold it contended that they had been purchased by way of investment,
and the sale of a part of them did not result in assessable profit.
The
claim was rejected by the Income-tax Officer, by the Appellate Commissioner, and by the Appellate Tribunal. The High Coun in a reference
un&,r s. 66( I) also rejected it.
The firm appealed to this Court by
special leave.
HELD :
(i) In reaching the conclusion that a transaction is an
adventure in the nature of ttade, the Appellate Tribunal has to find the
primary evidentiary facts and then apply the legal principle involved in
the statutory expression "adventure in the nature of trade",_ used in
s. 2(4) of the Indian Income-tax Act. A question of this description
is· a mixed question of law and fact and the decision of the Appellate
Tribunal thereon is open to challenge under s. 66( I) of the Act. [442
F-GJ
(ii) The question whether the transaction is an
adventure in
the
nature of trade must be decided on a consideration of a11 the relevant
facts and circumstances which are proved in the particular case.
The
answer to the question does not depend 011 the application of any abstract rule, principle or formula but must depend UPQn the total impression and effect of all the relevant facts and circumstances established
in the panicular case. [442 HJ
(iii) In the present case the appe!lant firm purchased the Brengun
factory from borrowed money. The income from the property was onlv
about 1/6 of the interest payable by the company on the money borrow·
ed.
The first sale was effected by the firm within three months of the
purchase. and the sums received from sale were utilised for paying off
the debts as also the dues to the Government. The firm had not enough
financial resources to invest the monev required to purchase the facto!"'.'
and the transaction could not therefore be with a view to making a perma·
nent investment, but only for making profit. It had not been established by
evidence that the appellant firm purchased the Brengun factocy for the
purpose of establishing a cycle factory.
Having regard to the total effect
of an the relevant facts and circumstances established in the case it was
rightly held by the High Court that the transaction was an adventure in the
nature of trade and pan of a profit making scheme. [448 B-HJ
(iv) The •tatement of case is not intended to be a mere copy of
the order sheet in a litigation but it must set out the ooints raised by the
aggrieved party, the reply thereto, if any, and the authorities or statutory
•
440
SUPREME COURT REPORTS
[1968) 2 S.C.R.
provisions relied upon for t~ view taken by the Appellate Tribunal to-
.~ether with an intelligible summary of the factS found by the Appellate
Tribunal.
The Tribunal should clearly state its conclusions and findings
ot fact and should not leave it r:o the lfigh Court or this C..ourt to deduce
the findings or to collect facts from a large number of documents which
:ire part of the record of the case. [449 A-DJ
Vankataswc.n1i l'Vaidu &: Co. v. (."ommissioner of Income-tax. 35 l.T.R.
594, Californian Copper Syndicate v.
Harris, 5 T.C.
159, Martin v.
I.awry, 11 T.C. 297, Rutledge v. Con1missioners of Inland Revenue, 14
Tax Cases 490, Commissioners of Inland Revenue v. Fraser, tk cssess<e,
24 Tax Cases 498, Leeming v. Jones, 15 Tax Cases 333, Saro; Kumar
Mazumdar v. Commissioner Income-tax, West Bt1111al, 37 l.T.R. 242 and
Commissioners of Inland Revenue '" Reinhold. 34 Tax Cases

## Text

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KHAN BAHADUR AHMED ALLADIN & SONS
v.
COMMISSIONER OF INCOME-TAX, ANDHRA PRADESH
November 24, 1967
[J. C. SHAH, V. RAMASWAMI AND V. BHARGAVA, JJ.)
Indian Income-tax Act, 1922, s. 2(4)-Adventure in the
nature of
trade--What is-Tests to determine-Question is mixed question of la»'
ond fact-Tribunaf s duty in preparing statement of case;
The assessee firm purchased a Brengun factory from the Government
of India and sold the stores and pan of the lands and buildings shortlv
afterwards at a higher price. It admitted before the Income-tax authorities that the purchase and sale in respect of the stores constituted an
adventure in the nature of trade, but in respect of the land and buildings
sold it contended that they had been purchased by way of investment,
and the sale of a part of them did not result in assessable profit.
The
claim was rejected by the Income-tax Officer, by the Appellate Commissioner, and by the Appellate Tribunal. The High Coun in a reference
un&,r s. 66( I) also rejected it.
The firm appealed to this Court by
special leave.
HELD :
(i) In reaching the conclusion that a transaction is an
adventure in the nature of ttade, the Appellate Tribunal has to find the
primary evidentiary facts and then apply the legal principle involved in
the statutory expression "adventure in the nature of trade",_ used in
s. 2(4) of the Indian Income-tax Act. A question of this description
is· a mixed question of law and fact and the decision of the Appellate
Tribunal thereon is open to challenge under s. 66( I) of the Act. [442
F-GJ
(ii) The question whether the transaction is an
adventure in
the
nature of trade must be decided on a consideration of a11 the relevant
facts and circumstances which are proved in the particular case.
The
answer to the question does not depend 011 the application of any abstract rule, principle or formula but must depend UPQn the total impression and effect of all the relevant facts and circumstances established
in the panicular case. [442 HJ
(iii) In the present case the appe!lant firm purchased the Brengun
factory from borrowed money. The income from the property was onlv
about 1/6 of the interest payable by the company on the money borrow·
ed.
The first sale was effected by the firm within three months of the
purchase. and the sums received from sale were utilised for paying off
the debts as also the dues to the Government. The firm had not enough
financial resources to invest the monev required to purchase the facto!"'.'
and the transaction could not therefore be with a view to making a perma·
nent investment, but only for making profit. It had not been established by
evidence that the appellant firm purchased the Brengun factocy for the
purpose of establishing a cycle factory.
Having regard to the total effect
of an the relevant facts and circumstances established in the case it was
rightly held by the High Court that the transaction was an adventure in the
nature of trade and pan of a profit making scheme. [448 B-HJ
(iv) The •tatement of case is not intended to be a mere copy of
the order sheet in a litigation but it must set out the ooints raised by the
aggrieved party, the reply thereto, if any, and the authorities or statutory
•
440
SUPREME COURT REPORTS
[1968) 2 S.C.R.
provisions relied upon for t~ view taken by the Appellate Tribunal to-
.~ether with an intelligible summary of the factS found by the Appellate
Tribunal.
The Tribunal should clearly state its conclusions and findings
ot fact and should not leave it r:o the lfigh Court or this C..ourt to deduce
the findings or to collect facts from a large number of documents which
:ire part of the record of the case. [449 A-DJ
Vankataswc.n1i l'Vaidu &: Co. v. (."ommissioner of Income-tax. 35 l.T.R.
594, Californian Copper Syndicate v.
Harris, 5 T.C.
159, Martin v.
I.awry, 11 T.C. 297, Rutledge v. Con1missioners of Inland Revenue, 14
Tax Cases 490, Commissioners of Inland Revenue v. Fraser, tk cssess<e,
24 Tax Cases 498, Leeming v. Jones, 15 Tax Cases 333, Saro; Kumar
Mazumdar v. Commissioner Income-tax, West Bt1111al, 37 l.T.R. 242 and
Commissioners of Inland Revenue '" Reinhold. 34 Tax Cases 389, referred to.
C1v1L APPEi.I.ATE JUR1smcnor; : Civil Appeals Nos. 708 to
710 of 1%6.
Appeals by special leave from the judgment and order dated
July 23, 1964 of the Andhra Pradesh High Court in Case Referred
No. 42 of 1962.
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Sukumar Mitra, Y. V. Anjaneyulu, Bhuvnesh Kumari, I. B.
D
Oadachanji and· 0. C. Mathur, for the appellant (in all the
appeals).
Niren /Je, Solicitor-Genera/, S. K. Aiyar, R. N. Sachthey and
S. P. Nayar, for the respondent (in all the appeals).
The Judgment of the Court was delivered by
Ramaswami, J. These appeals are brought by special leave
from the judgment of the High Collrt of Andhra Pradesh dated
23rd July, 1964 in referred ca-;e No. 42 of 1962.
The assessment years involved in these appeals arc 1358 F .•
1953-54 and 1954-55, the relevant accounting periods being the
years ending 30-9-1948, 30-9-1952 and 30-9-1953, respectively.
The assessec firm Khan Bahadur Ahmed Alladin & Sons (hereinafter refcrr~d to as the 'assessee firm') consists of three partners,
Khan Bahadur Ahmed Alladin, and his two sons, Khan Saheb
. Dost Mohammed Alladin and Noor Mohammed Alladin.
The
assessec firn: purchased the Brengun Factory and the properties
attached to it consisting of 403 acres of land, 14 factory buildings,
about one hundred residential quarters, and railway sidings, furnitures etc., in addition to the stores, from the Government of
India.
The price of the Brcngun Factory and the properties
together with the furniture etc. was fixed at Rs. 27 lakhs while
the price of the stores was fixed at Rs. 8 lakhs. During the relevant
accounting years, the assessee finn sold a part of the stores for
Rs. 9,53,918 0.S. and 46 acres of land, 14 factory buildings,
furniture, railway siding, etc. for Rs. 26,48,215 0.S. It was not
disputed that the excess over the price realised for the re-sale of
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AHMED ALLADIN v. C.I.T. (Ramaswami, J.)
441
stores was Rs. 2,26,484 O.S. and for the r(}-sale of part of the
factory land, building etc. was Rs. 10,46,834 O.S. It was admitted by the assessee firm before the Appellate Tribunal that the
suqllus realised by the re8ale of stores was not a capital accretion
but an adventure in the nature of trade.
With regard to the
factory it was argued that it was an invesunent, and not an adventure in the nature of trade and as such the excess amount realised
represented a realisation of capital asset.
The contention of the
as;essee firm was rejected by the Incom(}-tax Officer, by the
Appellate Assistant Commissioner and by the Appellate Tribunal
in appeal.
The view taken by the Appellate Tribunal was that
the assessee firm had planned a well calculated scheme of profit
making, that it had the intention of exploiting the properties which
it had purchased to its advantage, that the transactions in question
constitute an adventure in the nature of trade, and any surplus
which it got by sale of the portions of the properties was liable
to tax.
At the instance of the assessee firm, the Appellate Tribunal stated a case to the High Court on the following question of
law:
"Whether the purchase of the site and l:luildings
known as "Brengun. Factory" was in the cours~ of a
profit-making scheme or an adventure in the nature. of
trade ?"
By its judgment dated 23rd July, 1.964 the High Court answered
the question against the assessee firm.
On behalf of the appellant Mr. Sukumar Mitra argued that
the assessee firm along with Abdullah Alladin, brother of Khan
Bahadur Ahmed Alladdin had been carrying on business as a
partnership firm under the name of Khan Bahadur Ahmed
Alladdin and Company (hereinafter referred to Alladdin & Co.).
It had substantial interest in various joint stock companies, and
was the managing agent of several joint stock companies, and
possessed considerable financial resources.
The
assessee
firm
acquired the Brengun Factory with the intention of starting a
bicycle factory or some other industry as an investment, but not
with the intention of resale. The argument was stressed ,that the
purchase and sale of land and buildings was not in the line ·of
business of the assessee firm. It was stated that the purchase was
an isolated transaction and even after the sales, a major portion
of the factory remained with the assessee firm.
It was contended
that the assessee firm .had not developed the land or parcelled it
out with the view ·to sell it to purchasers as a residential area, and
make a profit. The submission made on behalf of the appellant
\V3S that the tran~action of purchase was in the nature of invest·
ment and was not an adventure in the nature of trade and the
sales represented the realisations of capital asset.
SUP.REM!! COU.RT .REPORTS
[1968) 2 S.C.R.
The provision of law under which assessment was made for
the asse,sment year 1358 F. was section 31 (3) of the Hyderabad
Jncome Tax Act (hereinafter referred to as the 'Hyderabad Act')
which corresponds to s. 23 ( 3) of the Indian Income Tax Act,
1922 (hereinafter referred to as the 'Indian Act').
The assess-
. ments for the subsequent years were made under the Indian Act.
The chargiag section under the Hyderabad Act is s. 3, which corresponds to s. 4 of the Indian Act.
The word "business" is
defined in s. 3 (I ) of the Hyderabad Act which is identical with
the language of s. 2( 4) of the Indian Act. Section 8 of the
Hyderabad Act states :-
"Save as otherwise provided by this Act, the following heads of income, profits and gains shall be chargeable to income-tax in the manner hereinafter appearing,
namely:-
(iv) Profits and gains of business, profession or
vocation".
It corresponds to s. 6 of the Indian Act.
The question whether profit in a transaction is a capital accretion or has arisen out of an adventure in the nature of trade is
a mixed question of law and fact In Yenlcattuwami Naidu & Co.
v. Commissioner of lncome-llU(') it was pointed out by this
Court that the expression 'in the nature of trade' in sub-section ( 4)
of section 2 of the Indian Act postulates the existence of cenain
elements in the adventure which in law would invest it with the
character of trade or business : and that a Tribunal while considering the question whether a transaction is or is not an adventure in the nature of trade before arriving at its conclusion on the
facts, has to address itself to the legal requirements a'sociated
with the concept of trade and business. In other words. in reaching the conclusion that the transaction is an adventure in the
nature of trade, the Appellate Tribunal has to find the primary
evidentiary facts and then apply the legal pr;nciplc involved in
the statutory expression "adventure in the nature of trade" used
by s. 2 (.4) of the Indian Act.
A question of this description i'
a mixed question of law and fact and the decision of the Appellate
Tribunal thereon is open to challenge under s.·66 ( 1 ) of the Indian
Act.
The question whether the transaction is an adventure in th~
nature of trade must be decided on a consideration of all the
relevant facts and circumstances which arc proved in the particular case. The answer to the question does not depend upon the
application of any abstract rule, principle or formula but must
(I) 35 l.T.R. 594.
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AHMED ALLADIN v. c.1.T. (Ramaswami, I.)
443
depend upon the total impression and l?ffect of all the relevant
facts and circumstances established in the particular case. In
Californian Copper Syndicate v. Harris( 1), Lord Justice 'Clerk
observed, ·:.It is quite a well settled principle in dealing with questions of assessment of income-tax that where the owner of an
ordinary investment chooses to realise it, and obtains a greater
price for it than he originally acquired it at, the enhanced price
is not profit ........ assessable to income-tax. But it is equally
well established that enhanced values obtained from realisation or
conversion of securities may be so assessable where what is done
is not merely a realisation or change of investment, but an act
done in what is truly the carrying on, or carrying out, of a business ...... What is the line which separates the two classes of
cases may be difficult to define, and each case must be considered
according ta its facts; 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 the operation of
business in carrying out a scheme for profit making ?"
But in
judging the character of such transactions several factors have
been treated as significant in decided cases.
For instance, if a
transaction is related to the business which is normally carried on
by the assessee, though not directly part of it, an intention to
launch upon an adventure in the nature of trade may readily be
inferred.
A similar inference would arise where a commodity
is purchased and sub-divided, altered, treated or repaired and sold
or is converted into a different commodity and then sold.
The
magnitude of the transaction of purchase, the nature of the com-
.modity, the subsequent dealings of the assessee the nature of the
organisation employed by the assessee and·the manner of disposal
may be such that the transaction may be stamped with the ch~rac
ter of a trading venture In Martin v. Lowry( 2 )
the assessee
purchased a large quantity. of aeroplane linen and sold it in
different lots, and for the purpose of selling it started an advertising campaign, rented offices, engaged an advertising manager,
a linen expert and a staff of clerks, maintained account books
normally used by a trader, and passed receipts and payment in
connection with the linen through a separate banking account.
It was held that the assessee carried an adventure in the nature
of trade and ·so the profit was liable to be taxed. The same view
was taken in Rutledge v. Commissioners of Inland Revenue(')
in regard to an assessee who purchased very cheaply a vast
quantity of toilet paper and within a short time thereaftet sold
the whole consignment at a considerable profit.
Similarly, in
Commissioners of Iniland Revenue v. Fraser, the assessee(') a
woodcutter bought for resale, whisky in bond, in three lots. He
(1) 5 T.C. 159, 165-6.
(3) 14 Tax CaS<e_s 490.
m 11 Tax Cases 297.
(4) 24 Tax Cases 498,
444
SUPREME COURT REPORTS
(1968) 2 S.C.R.
sold it later on at considerable profit.
The assessee had never
dealt in whisky before, he bad no special knowledge of the trade,
he did not take delivery of the whisky nor did he have it blended
and adveniscd. Even so it was held that the transaction was not
an adventure in the nature of trade.
Lord President Normend
observed in the course of the judgment : "It is in general more
easy to hold that a single transaction entered into by an individual
in the line of his own trade ( altliough not part and parcel of bis
ordinary business) is an adventure in the nature of trade than
to hold that a transaction ehtered into by an individual outside
the line of his own trade or occupation is an adventure in the
nature cf trade.
But what is a good deal more important is the
nature of the transaction with reierence to the commodity dealt
in.
The individual who enters into a purchase of an article or
commodity may have in view the resale of it at a profit, and yet
it may be that that is not the only purpose for which he purchased
the article or the commodity, nor the only purpos$ to which he
might turn it if favourable. opponunity of sale does not occur. In
some of the cases the purchase of a picture has been given as an
illustration.
An amateur may ·purchase a picture with a view
to its resale at a profit, and yet he may recognise at the time Of'
afterwards that the possession of the picture will give him aesthetic
enjoyment if he is unable ultimately, or at his chosen time, to
realise it .at a prolit. A man may purchase stocks and shares with
a view to selling them at an early date at a profit but, if be does
so, he is purchasing something which is itself an investment, a
potential source of revenue to him while he holds it. A man may
purchase land with a view to realising it at a profit, but it also may
yield him an income while he continues to hold it.
If he continues to hold it, there may be also a cenain pride of posses.~ion.
But the purchaser of a large quantity of commodity like whisky,
greatly in excess of what could be used by himself, his family
and friends a commodity which yields no pride of possession,
which cannot be turned to account except by a process of realisation, I can scarcely consider to be other than an adventurer in a
transaction in the nature of a trade; and I can find no single fact
among tho~c stated by the Commissioners which in any way
traverses that view.
In my opinion, the fact that the transaction
was not in the way of business (whatever it was) of the respondent in no way alters the character which almost necessarily
belong' :o a transaction like this".
These arc cases of commercial commodities but a transaction
of purchase of land cannot be assumed without more to be an
adventure in the nature of trade. In Leeming v. Jones(') syndicate was formed to acquire an option over a rubber estate with
a vie~ to resell it at a profit, and finding the estate too small the
(I) IS Tax Cases 333.
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AHMED ALLADIN V. C,.!.T. (Ramaswami, J.)
445
syndicate acquired another estate and sold the two estates on
profit.
It was held that the transaction was not in the nature of
trade and the profit was not liable to be assessed to tax.
The
same view was expressed in Saroj Kumar Mazumdar v. Commissioner of Income-tax West Bengal('), in which the assessee who
carried on business of engineering works purchased land w.hich
was under requisition by the Government, negotiated a sale before
the land was de-requbitioned and sold it after the land was
released.
Again in Commissioners of TnlanJ Revenue v. Reinhold(") the ·respondent who. carried on business of wharehousemen bought four houses in January, 1945, and sold them at a
profit in December, 1947.
He admitted that he had bought the
property with a view to resale and had instructed his agents to
sell whenever a suitable opportunity arose.
On behalf of the
Crown it was contended that the purchase and sale constituted
an adventure in the nature of trade and the profits arising therefrom were chargeable to income tax. It was held by the Court of
Se;sions that the initipl intention of the respondent to purchase
the property w11h a view to resell did not pd se establish that the
transaction was an adventure in the nature of trad.e and the Commissioners were· Justified in treating the profit as not assessable to
income tax.
But the circumstance of a particular case may lead
to the conclusion that the purchase or resale of land is in the
nature of trade.
In Vcnkataswami Naidu's(') case the appellant
firm which acted as managing agents purchased,
for
a
total
consideration of Rs. 8, 713 four contiguous plots of land
adjacent to the place where the mills of the company managed
by it were situated.
The first. purchase was made in October.
194 l and the second and subsequent purchases were made in
November, 1941, June. 1942 and November. 1942.
As Ion~ as
the appellant was in possession of the land it made no effo1~t to
cultivate it or erect any superstructure on it but allowed the land
to remain unutilised except for the rent received from the house
which existed on one of the plots.
The appellant sold the land
to th'e company managed by it in two lots in September and
November, 194 7. for a total consideration of Rs. '52.600.
The·
question was whether the sum of Rs. 43,887 being the excess
realised by the appellant by the two sales over its purchase price
was assessable to income tax. _ The Appellate Tribunal rejected
the coniention of the appellant that the properties were bought
as :in investment and that the plots were acquired for building
tenements for· the labourers of the mills but came to tne conclu-
~ion .that the transaction was an adventure in the nature of trade.
On a reference, the High Court expressed the same vie.w. It was
held by this Court in appeal that the Appellate Tribunal was
ri~_t_in inferring that __t_~e appellant l'ttew that it would be able
(l) 37 Tax Cases 242
(2) 34 Tax Cases 389.
(3) 35 1.T.R. 594.
ISup.C.I '68 -·14
446
SUPREME COURT REPORTS
[1968] 2 S.C.R.
to sell the lands to the managed company whenever it thought it
profitable so to do, that the appellant purchased the four plots
of land with the sole intention of selling them to the mills at a
profit and that the High Court was right in holding that the transaction was an adventure in the nature of trade.
As we have already said it is not possible to evolve any legal
test or formula which c_an be applied in determining whether a
transaction is an adventure in the nature of trade or not.
The
answer to the question must necessarily depend in each case on
the total impression and effect of all the relevant factors and circumstances proved therein and which determine the character of
the transaction.
What then arc the material facts found in the
present case ?
Alladin & Co. was the managing agent of several joint stock
CO!llpanies dz., Hyderabad Asbestos Cement Products Limited
(hereinafter referred to as the Asbc-stos Co.). Hyderabad Lan1inated Products Limited (hereinafter referred to as the Laminated
Products), Hyderabad Allwyn Metal Works Limitw (hereinafter
referred to as the Allwyn Co.) and others. Alladdin & Co. started
Asbest(ls Co. in 1946 and the Laminated Products in 1947. The
Government of Hyderabad had 50% share holding in both these
companie~.
Negotiations for the purchase of Brengun Factory
situate in the out-skirts of Hyderabad commenced in December,
I 946.
On I Sth December, 1946, there took place a meeting
between Khan Sahcb Dost Mohammed Alladin and Noor
Mohammed Alladin on behalf of Alladin & Co. and Khan Bahadur
Obaidullah, the then Additional Financial Adviser to the Government of India.
The latter informed the two Alladin brothers
that the Government of India had decided to sell the Brengun Factory as the war had ended and it was going cheap. It was agreed
that the price of the factory building should be fixed at Rs. 27 lakhs.
and of the stores at Rs. 9 lakhs.
Alladdin & Co. asked for six
months' time for making the payment hut finally it was agreed
that the price should be paid in four equal monthly instalments
commencing from 1st January, 1947. The contract of sale was
made subject to the condition that the Hyderabad Government
was no longer interested in the factory and also ;,ubject to the
confim1ation by the Board of Directors.
By its letter dated
December '.'.4. 1946, Alladdin & Co. accepted the proposal and
informed the Additional Financial Adviser that the Board had
agreed to purchase the Brengun Factory and the first payment
would he made on !st or 2nd January. 1947.
Not having ready
cash to pay the first instalment the firm borrowed the sum from
the State Bank and the Central Bank pledging the shares of the
partners valued at about Rs. 20 lakhs for Rs. 9 lal.hs. It is significant that the assessee firm invested very little of its own money
in the purchase of the factory and the stores. Jt got six months
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AHMED ALLADIN v. C.!.T. (Ramaswami, I.)
447
time from the Government of India to pay the price in instalments.
and paid it by pledging its shares with the Banks, by obtaining
further loan from the Banks on over drafts, and by selling portions of the factory to the Asbestos Co. and Laminated Products,
and the Allwyn Co.
The balance sheet of the as~essee 1ln11 as
on 31-9-1948 disclosed that the assessee firm owed about Rs. 7
lakhs to Government of India, though by that time it had sold
properties valued over Rs .. 30 lakhs. It is a significant circumstance that on 23rd December, 1946 a meeting of the Board of
Directors of the Asbestos Co. was held and in that meeting a
resolution was passed that the Government should be approac.hed
in the matter of the valuation of the site and building in the establish1nent of the "Asbestos Works" in the premises of the Brengun
Factory purchased by the assessee firm and that the managing
agents be authorised to address Nawab Medhi Nawaz Jung Bahadur in that behalf. ';['he notice convening the meeting was issued
on the 23rd December, 1946, on which date the asscssee firm had
not even intimated their acceptance of offer made by the Government of India for the sale of Brengun Factory. Pursuant to the
resolution of 28th Decemper, 1946, the Asbesfos Co. resolved to
purchase 14 acres of land, buildings de. for Rs. 5 lakhs. It should
be noticed that the valuation by the P.W.D. which was considered
necessary on the 28th December, 1946 was given up and the price
of Rs. 5 lakhs was accepted by the Board of Directors. In the
circumstances, the inference that that resolution was passed at the
instance of the assessee firm is not unreasonable. Pursuant to the
resolution a sale-deed appears to have been ex~cuted in favour
of the Asbestos Company on 31st March, 1947. It is apparent
that the interval of time between the purchase of the factory and
the sale was about 3 months, and this is hardly consistent with the
contention of the assessee firm, that it had purchased the property
M an investment. It is also admitted that the sale-deed in favour
of the Asbestos Co. as well as the Laminated Products and Allwyn
Co. were executed by the Government of India in their favour
direct. The sale was in favour of the Laminated Products pursuant to a resolution passed on 17th September, 1947. On that
day the company resolved that in view of the special facilities for
power, water and railway siding at the Alladin Industrial Estate.
Sanathnagar, sanction should be accorded for the acquisition of the
proposed area of 8 acres of land for the location of the. company's
factory as per the rate offered to the company i.e .. at O.S. Rs. 5,000
per acre and a sum of Rs. 40,000 was agreed to be paid towards
the price. A sale-deed was executed pursuant to the resolution in
June, 1948. The next transaction relates to the purchase by the
A!lwyn Co. The Board of Directors at its meeting on October 29,
1947, resolved to sell away their existing factory buildings at Azamabad to the Nizam's State Railway, and purchase the new factory,
448
SUPREME COl:RT REPORTS
( 1968) 2 S.C.R
land and buildin~ as Sanathnagar, for Rs. 25 bkhs. The pro·
pcrty purcha,.cd consisted of 24 acres of land, factory building;
and furniture, and the sale deed was executed on February 11,
1948.
lt is manifest that within one year of the purchase of !he
Brcngun Factory, the assesscc firm realised Rs. J 3,99,753 by the
sale of 'tores and Rs. 33,90,908 by the sale of 46 acres of
land and buildings, in all making a profit of R>. I J ,90.661.
It
appears from the balance sheet as on September 30, 1948 that
c1·en after the extended date, it still owed Rs. 7 lakhs to the GO\··
ernmcnt though by that time it had sold over Rs. 30 lakhs worth
of property.
The assessce firm was thus paying off the dues w
the Government and also discharging its debts by selling fractions of the property. In other words, the assessee firm was purchasing, sening and liquidating the loans, which would all show
the co1ni>1ercial nature of the transaction.
These facts establish
that the assessee tirin had not enough financial resources to invest
Rs. :ib lakhs on the Bren Gun Factory and that the transaction
was launched upon with a view to make profit and not as a permanent investment.
There is another aspect of the matter to be
taken into account.
The property income from Bren Gun Fae·
tory during the year 1953-54 as would appear from the Assess·
ment Orders of the years. 1953-54. 1954-55 was about Rs. 22,00(1
1.Q. The interest on loans on over-drafts is paid to be 4t per cent.
on 27 lakhs the balance of price payable to the Government. the
annual imcrest would be about Rs. 1,21,500. rt is manifest that
the assc,sec ltrm could not have borrowed the money to purcha>.:
the property as an investment when the income was about 1/6
of the imcre>t payable on the amount borrowed.
Mr. St•l:.,~nar
Mitra suggc,tcd that the assessec firm intended to develop the
Bren Gun Factory as an Industrial Estate and referred w certain
correspondence in this connection.
But the correspondence ·doc'
not cstahlish that any of the foreigri companies agreed to start
a cydc factory of their own or in collaboration with the assessce
fimi.
The correspondence between the parties admitledly ended
in February 1946.
Mr. Sukumar Mitra also referred to the corre:;p<mdcncc between January 8. 1947 to March 10. 19.t7 hut
this ~l!-ln c..Jo~·~ not show that there was any prospl.'.:ct of the assesscc
firm starting a cycle industry or any other industry either solcl\
or in collaboration with a foreign company.
Having regard to total effect of all th~ relevant facts and cir·
cmmtances established in this case we are of the opinion that the
High Court was right in its conclusion that the purchnsc of the
site and the buildings of the Bren Gun Factory was an adventure
ir the nature of trade and was in the course of a profit making
scheme and the question was rightly answered hy the High Court
against the assesscc firm.
A
B
c
D
F
G
H
A
B
c
I)
E
AHMED ALLADIN V. ·C.I.T. (Ramaswami, J.)
H~
We consider it necessary to add that the statement of the case
made by the Appellate Tribunal is unsatisfactory and gives no
information whatever about the arguments rc,pectively advanced
by the parties or the findings recorded by the AppeJlate Tribunal.
The statement of the case is not intended to be mere copy of the
order sheet in a litigation but it must set out the points raised by the
aggrieved party, the reply thereto, if any and the authorities or
statutory provisions relied upon for the view taken by the Appellate Tribunal together with an intelligibie summary of the facts
found by the Appellate Tribunal. A statement of the case should
fully, clearly and precisely set out all the relevant facts, or if the
facts have been fully set out in the judgment of the Tribunal they
may be incorporated in. the statement of the case by a reference to
partkular paragraphs of the judgment in which the facts are so
set out. In any event, it is important that the Appellate Tribunal'
should state clearly its conclusions and findings of fact and should
not leave it to the High Court or this Court to <le<luc;: the findings
or. to collect the facts from a large number of documents which
are part of the rl!cord of the case. A statement of the case which
does .not set out precisely the findings of the Appellate Tribunal
on the questions of Jaw and fact serves no useful purpose.
It
merely gives an opportunity to the parti!!s to put forward argumenl' ~t the stage of reference which are often untenable.
I'or the re:;sons afready expressed we hold that these appeals
must be dismissed with costs.
There will be one hearing fee.
G.C
Appeals dis,mis.•ed.
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