MOTHAY GANGARAJU Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE question referred to us is :

(2.) IT is contended by Mr. Patanjali Sastri that, although this was an isolated transaction - as indeed it was and there is certainly no evidence of the assessee ever having entered into a transaction of a similar nature either before the date of this or after it - nevertheless this was an adventure or concern in the nature of trade. He argues that it was a speculation, that a very low price was given in comparison to the amount subsequently realised and that in that speculation the capital of the assessee was embarked. In our view this cannot be described as an adventure or concern in the nature of trade. The trading activities of the assessee were limited to lending money, owning land, if that can be called a trade, and having an interest in cotton mills and this is in no sense a transaction related to any of those activities. In this case the interest in the legacies was not even purchased from anybody who was indebted to the assessee in his money-lending business. IT was an isolated transaction, although probably enter to into by him as a speculation, as he happened to make a good profit out of it. We are quite unable to see that it has any connection whatever with any other business carried on by the assessee. By itself the purchase of an interest in legacies, the subject of litigation cannot certainly be described as a trade or business. Reference has been made to the case of Rutledge v. Commissioners of Inland Revenue [14 Tax Cas. 490] by Mr. Patanjali Sastri in support of his argument. In that case the appellant was a money-lender who was also in 1920 interested in a cinema company. He had since that time been interest in various business. Being in Berlin in 1920 on business connected with the cinema company he was offered an opportunity of purchasing very cheaply a large quantity of paper. He effected of purchase and within a short time after his return to England sold the whole consignment to one person at a considerable profit and it was held that the profits in question were liable to assessment to income-tax and to excess profits duly as being profits of an adventure in the nature of trade. The facts of that case are quite dissimilar to those here. There, what was purchased was a quantity of toilet paper and it was a very large quantity, not a quantity which an ordinary person would buy for private use. IT was of such a large quantity as clearly to make it a business transaction; and obviously the intention with which this large quantity was bought at an exceedingly low price was with the object of selling it later on at a favorable opportunity at an enhanced price and getting the benefit of the profit therefrom. This is quite clear, I think, from the judgment of LORD SANDS who says at page 497 :