KARUMURU VENKATA RAMANADHAM Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE question to be answered by us in this reference i :

(2.) THE reference relates to the assessment year 1956-57, the relevant accounting year being the Telugu year ended April 11, 1956. THE assessee is a Hindu undivided family and carries on money-lending business. In satisfaction of the debts due to him, the assessee had been taking lands from his debtors. Some of these lands were sold by the assessee during the accounting year for Rs. 30,800. THE Income-tax Officer treating these lands as stock-in-trade of the assessee, i.e., as part of the assets of the money-lending business, brought the profits made by the assessee out of this transaction to tax. He estimated the profits at Rs. 24,640 which amount on appeal was reduced to Rs. 20,533. "In treating the lands as forming part of the stock-in-trade of the money-trading business, the Income-tax Officer took into consideration the circumstances that the income from these lands was credited in the books of the money-lending business and that right from the beginning the sale proceeds of these lands were being credited and utilized for re-lending in the assessees money-lending business.

(3.) THE learned counsel for the assessee urges on the basis of the above passage that unless all these elements exist in the transaction a purchase by the money-lender of properties in discharge of loans taken by third parties could not be regarded as forming part of the stock-in-trade of his money-lending business. We do not think that we can assent to this view. THE learned Chief Justice has indicated several of the modes of making an acquisition of lands as forming part of the stock-in-trade. THE passage does not lay down that it is the cumulative effect of all these ingredients that would go to make the lands thus acquired the assets of the money-lending business, if any one of the elements indicated above is present that suffices to make the lands the stock-in-trade of the business. That this is so appears from paragraph 15 of the judgment in which his Lordship observe :