RAMANATHAN V Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS reference under section 66 of the Indian Income-tax Act raises the question, whether a particular transaction of purchase and sale of a tea estate by the assessee amounts to an adventure in the nature of a trade.

(2.) IN the year ended June 30, 1955, the previous year for the relevant assessment year 1956-57, the INcome-tax Officer assessed the aforesaid amount of Rs. 38,742 as income or profit arising out of an adventure in the nature of trade. The assessee as stated already claimed a loss of Rs. 12,612. Out of this amount the INcome-tax Officer disallowed a round sum of Rs. 2,500 as expenditure not laid out or expended solely and exclusively for the purpose of the business. The balance loss of Rs. 10,112 was allowed and the result was the taxable amount was determined as Rs. 28,630 (Rs. 38,742 minus Rs. 10,112). The view of the INcome-tax Officer was that the assessee did not purchase the estate as an investment but purchased and sold it as part of a business venture. The assessee went up on appeal to the Appellate Assistant Commissioner, who however confirmed the decision of the INcome-tax Officer. There was a further appeal to the INcome-tax Appellate Tribunal by the assessee; but that appeal also failed. At the instance of the assessee, the Tribunal has referred the following question of law under section 66 (1) of the Act : "Whether the inference that the aforesaid transactions amounted to a venture in the nature of trade is correct in law ?"