COMMISSIONER OF INCOME TAX Vs. BIPIN KUMAR WORAH

JUDGEMENT

(1.) THIS is a reference under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), made by the Income-tax Appellate Tribunal, Patna Bench (hereinafter referred to as "the Tribunal"), at the instance of the Commissioner of Income-tax, Bihar and Orissa, and relates to an assessment proceeding against B. K. Worah of Dhanbad (hereinafter referred to as "the assessee"), relating to the assessment year 1962-63.

(2.) THE facts leading to the reference, stated briefly, are as follows : THE assessee is an individual. He has income from house property, dividends and interest. On the 4th August, 1961, the assessee entered into a forward contract for sale of 3,000 shares of Indian Iron & Steel Co. at the rate of Rs. 26.55 per share. He entered into another contract for sale of 12,000 shares of the said company on the 9th August, 1961, at the rate of Rs. 26.22 per share. On the 30th August, 1961, the contracts were settled by payment of the difference. THE ruling price on that day was Rs. 25.50 per share. This resulted in receipt of a sum of Rs. 19,485 by the assessee. THE Income-tax Officer treated the aforesaid sum as speculation profit and included it in the assessment of the assessee. THE assessee challenged the inclusion of the said amount in appeal before the Appellate Assistant Commissioner on the ground that the said profit was not as a result of an adventure in the nature of trade so as to bring it Within the definition of "business" under Section 2(13) of the Act and liable to be taxed. THE Appellate Assistant Commissioner, however, held that, on the facts and in the circumstances of the case, the amount in question represented speculation profit and rejected the contention of the assessee that the amount should not have been the subject-matter of assessment. He, accordingly, dismissed the appeal on the 5th August, 1965. Against the said order of the Appellate Assistant Commissioner, the assessee filed an application before the Appellate Tribunal. THE Tribunal, by its order, dated the 25th July, 1967, held that the amount in question was not a receipt from any regular source of commercial nature and it would not be covered within the definition of "business" as given in the Act, being nonrecurring and casual in nature, and, as such, it was not liable to assessment in the hands of the assessee. An application for reference under Section 256(1) of the Act on behalf of the Commissioner of Income-tax having been filed, the Income-tax Appellate Tribunal has referred the following question of law for decision by this court:

(3.) IN the case of G. Venkataswami Naidu & Co., Gajendragadkar J, (as he then was), observed as follows: