W L KNOPP Vs. COMMISSIONER OF INCOME-TAX

JUDGEMENT

(1.) The question referred to us by the Income-tax Appellate Tribunal is: Whether in the circumstances of this case there is material to justify that the ventures in questions were ventures in the nature of trade. The assessee-applicant is a partner in a firm of stock brokers carrying on business in Madras. In the year of accounting--1 February, 1942 to 31 January, 1943-- he sold shares in various companies on 12 occasions and as a result of these sales he made substantial profits amounting to Rs. 6,887-12-0. The Income-tax Officer included this amount in the assessment for the year on the ground that it represented profits arising from business. This view was upheld by both the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal.

(2.) The material facts which can be gathered from the several orders in the case are as follows: From 1936 onwards the assessee had been in the habit of purchasing and selling shares. Between the 1 February, 1936 and 31 January, 1937, he bought 1,382 shares in 7 transactions and sold 254 shares in 5 transactions. In the next year he purchased 346 shares in 11 transactions and sold 495 shares in 9 transactions. In the next year he purchased 452 shares and sold 415 shares in 5 transactions. In the next two years he purchased 616 and 105 shares, but did not sell any. During the period from 1 February, 1941 to 31 January, 1942, he purchased 426 shares in 7 transactions and sold 100 shares in one transaction, and in the accounting period he purchased 3,446 shares in 3 transactions and sold 1,031 shares in 12 transactions. Taking the sales in the accounting period we find that some shares purchased on 26 November, 1941, were sold on 23 October, 1942, and 1 December, 1942. There were other shares which were applied for on 23 November, 1942, and sold away on 21 January, 1943.

(3.) This Court is not asked, and it is no part of the Court's duty, to determine whether on the evidence on record this Court itself would come to the conclusion whether the assessee was carrying on the business of purchasing and selling shares. The_ only duty of the Court is to find out if there is any evidence to support the finding of fact arrived at by the Tribunal. In this case we find it impossible to say that there is no material whatever on which the Tribunal could have come to the finding that the assessee was carrying on a trade. This is not a case in which the assessee purchased a large number of shares for investment and gradually or at a time disposed of such of the shares which he did not wish to retain. There is certainly enough material in this case for the Tribunal to hold that the assessee must have been purchasing these shares with a view to resale and the purchases and sales were transactions in the course of the carrying on of a business. In Californian Copper Syndicate (Ltd. and Reduced) V/s. Harris (1904) 5 Tax Cases 159, Clark, L.J., lays down the criterion to be adopted in dealing with cases like the present thus: 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 in the sense of Schedule D of the Income-tax Act of 1842 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. The simplest case is that of a person or association of persons buying and selling lands or securities speculatively, in order to make gain, dealing in such investments as a business, and thereby seeking to make profits. In the same case, Lord Trayner said: This is not, in my opinion, the case of a company selling part of its property for a higher price than it paid for it, and keeping that price as part of its capital, nor a case of a company merely changing the investment of its capital to pecuniary advantage. It cannot be said that there is no material in this case on which the Tribunal can rest its conclusion that the purchases by the assessee were not in the nature of investment or change of investment, but really in the nature of a business. The learned Counsel for the assessee cited to us the decision of the Allahabad High Court in In re Seth Ganga Sagar . But the decision in that case really does not help him as the learned Judges there do not lay down a rule different from that enunciated in Californian Copper Syndicate (Ltd. and Reduced) V/s. Harris (1904) 5 Tax Cases 159.