JUDGMENT [ENTITY], J.
1. This reference under [SECTION] of the [ACT], hereafter referred to as "the Act", has been made by the Income-tax Tribunal, Delhi Bench "A", at the instance of the Commissioner of Income-tax and relates to the assessment proceedings against Messrs. [ENTITY], a Hindu undivided family, hereafter referred to as "the assessed", relating to the assessment year 1962-63. The previous year of the assessed ended on August 31, 1961.
2. Facts leading to the reference, stated briefly, are that the assessed-family owned a building at Uttariya Marg. New Delhi, and resided in part of it while its remaining portion was in the occupation of tenants. On January 9, 1959, it purchased one plot of land bearing No. C-28, defense Colony, New Delhi, for Rs. 9.465. On January 18, 1959, it purchased another plot bearing No. C-215 also in defense Colony for Rs. 9,250. On April 8, 1961, the first plot was sold by it for Rs. 27,000 and on June 9, 1961, it sold the second plot also for Rs. 27,000 thereby earning a substantial profit. During the assessment for the year 1962-63 the assessed contended before the Income-tax Officer that this profit was a capital gain. The Income-tax Officer repelled this contention and held that this profit amounting to Rs. 35,319 was business profit earned by "adventure in the nature of a trade". The amount was, therefore, added to the income of the assessed and assessment was framed accordingly. Aggrieved by this, the assessed filed an appeal before the Appellate Assistant Commissioner but the same was dismissed. In second appeal before the Tribunal, however, the contention of the assessed was accepted and the Tribunal held that the plots had been purchased in the course of investment and the profits realised on their sale was not an income from business. At the instance of the Commissioner, the Tribunal has now referred the following question for decision of the court :
"Whether, on the facts and in the circumstances of the case, the excess price realized by the assessed on the sale of the two plots in defense Colony, New Delhi, was its income from business ?"
3. It is mentioned in the statement of case that according to the findings arrived at by the Tribunal on February 26, 1959, the assessed had purchased one other plot bearing No. 10/64, situated at Najafgarh Industrial Area for Rs. 32,405. On this plot the assessed constructed a building which was leased out by it on a monthly rent of Rs. 3,750 and that in addition to the above plots it also had one other plot bearing No. C/9, Rohtak Road, purchased before 1957 for Rs. 3,547 which it still retained at the relevant time. The two plots in defense Colony and the plot at Najafgarh Industrial Area are stated in the statement of case to have been purchased by the assessed by raising loans from the firm of Messrs. Raunaq Singh and Co. which the Tribunal has found was a firm constituted exclusively by members of the assessed-family. The Tribunal has also found that the assessed-family was making tremendous progress in business and wanted to acquire status and stability by making permanent investment in immovable properties and by building up a permanent source of property income. The Tribunal further found that investment in land was not the line of business of the assessed-family and that investments in purchasing the two plots were, relatively speaking, very small. It also rejected the possibility of the assessed choosing to invest money in altogether a new line of business, namely, the business of real property when its other business was a profitable one. The occasion for the sale of these two plots, the Tribunal has held, arose because the assessed at the relevant time was committed to acquire shares worth Rs. 25,00,000 in Bharat Tubes and it was this pressing necessity which forced it to drop its original idea of constructing buildings over these two plots and to sell them.
4. Finding arrived at by the Tribunal on questions of pure fact have got to be relied upon by the High Court in a reference under [SECTION] of the Act, unless it is shown that there was no evidence before the Tribunal upon which they as reasonable men could have come to the conclusion at which they arrived. In [PRECEDENT] the Supreme Court held that this would be so even if the High Court on the evidence relied upon by the Tribunal was inclined to a conclusion different from that of the Tribunal. It is not the case of the revenue that there was no evidence in this case before the Tribunal in support of the findings recorded by them. The question, therefore, has to be answered on the basis of facts as found by the Tribunal.
5. [SECTION] of the Act provides that profits and gain's of any business or profession which was carried on by the assessed at any time during the previous year shall be chargeable to income-tax. "Business" is defined in [SECTION] of the Act to include any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture. The case of the revenue is that the sale of these two plots by the assessed was an adventure in the nature of trade or business. No hard and fast test had been laid down for the determination of this question. The decision essentially has to depend on the facts of each case. As observed by [ENTITY] J. (as he then was) in [ENTITY] v. Commissioner of Income-tax, , the question whether the transaction is an adventure in the nature of trade must depend upon the collective effect of all the relevant material brought on the record. General criteria indicating that certain facts have dominant significance in the context of other facts have been adopted in decided cases. In [ENTITY]'s case [ENTITY] J. observed :
"If, for instance, a transaction is related to the business which is normally carried on by the assessed, though not directly part of it, an intention to launch upon an adventure in the nature of trade may readily be inferred. A similar inference would arise where a commodity is purchased and Sub-divided, altered, treated or repaired and sold, or is converted into a different commodity and then sold. Magnitude of the transaction of purchase, the nature of the commodity, subsequent dealings and the manner of disposal may be such that the transaction may be stamped with the character of a trading venture : for instance, a man who purchases a large quantity of aeroplane linen and sells it in different lots, and for the purpose of selling starts an advertising campaign, rents offices, engages an advertising manager, a linen expert and a staff 6f clerks, maintains account books normally used by a trader, and passes receipts and payments in connection with the linen through a separate banking account : [PRECEDENT]; a person who carries on a money-lending business purchases very cheaply a vast quantity of toilet paper and within a short time thereafter sells the whole consignment at a considerable profit : [PRECEDENT] and a person, even though he has no special knowledge of the trade in wines and spirits, purchases a large quantity of whisky and sells it without taking delivery of it at a considerable profit : [PRECEDENT]. may be presumed, having regard to the nature of the commodity and extent of the transaction coupled with the other circumstances, to be carrying on an adventure in the nature of trade. These are cases of commercial commodities. But a transaction of purchase of land cannot be assumed without more to be a venture in the nature of trade. A director of a company carrying on the business of warehouseman purchasing a number of houses with a view to resale, and selling them at a profit some years after the purchase : [PRECEDENT] a person carrying on business in various lines, including an engineering works, purchasing land which was under requisition by the Government, negotiating sale thereof before the land was de-requisitioned, and selling it after the land was released : [PRECEDENT] and a syndicate formed to acquire an option over a rubber estate with a view to earn profit, and finding the estate acquired too small acquiring another estate and selling the two estates at a profit : [PRECEDENT]. may not be regarded as commencing a venture in the nature of trade. These are cases in which the commodity purchased and sold is not ordinarily commercial, and the manner of dealing with the commodity does not stamp the transaction as trading venture."
6. The profit motive, it was observed by the learned judge, in entering into a transaction is not decisive because in the normal course an accretion to capital does not become taxable income merely because an asset was acquired in the expectation that it may be sold at profit. In [PRECEDENT] noticed in [ENTITY]'s case by the learned judge, the appellant was engaged in various types of business activities and was a shareholder and a director and managing director of several companies and was also a partner in a firm of engineering works. With a view to acquire a plot of land for the purpose of building a residential house for himself and constructing a workshop in connection with the business activities in pursuance of an agreement entered into on January 10, 1946, he paid a sum of Rs. 32,748 to an insurance society. This amount represented 25 per cent. of the estimated price of land which formed part of a large area comprised in a land development scheme undertaken by the society. The area which the society had undertaken to develop was in the occupation of the Government, having been requisitioned for purposes connected with the prosecution of the [ACT]. One of the terms of the agreement entered into by the appellant was that the transaction or purchase would be completed within six months of the lands being released from the Government occupation. Later, the appellant found one other person 'Y' to whom he agreed to assign his right under the agreement with the society for a consideration of Rs. 1,07,000. This amount had to be held on suspense account until the transaction of purchase of the plot of land was finalised. 'Y' undertook to pay the balance of the sale price of the land amounting to Rs. 98,000 to the society. The appellant received a sum of Rs. 1,07,000 on April 3, 1947, from 'Y' and ultimately on December 27, 1950, the society executed a deed of conveyance of the plot in favor of the daughter of 'Y'. The question arose whether the transaction of the asses see amounted to "adventure in the nature of trade" and whether the amount of Rs. 74,485 received by the appellant in excess of the amount paid by him to the society was a taxable profit. The Tribunal before whom the matter came up in appeal took the view that the sale was "an adventure in the nature of trade" and the profits made by the appellant were assessable to income-tax. The Supreme Court disagreed with this finding and held, amongst others, by the majority judgment that where a transaction was not in the line of the business of the assessed but was an isolated or single instance of the transaction the onus was on the department to prove that the transaction was an adventure in the nature of trade. The court also observed that to sustain the conclusion of the Tribunal there ought to have been clear evidence to show that the land was purchased by the appellant with the sole intention of selling it later at profit. In this case the fact that the appellant, at the time when he entered into the agreement with the society, was doing good business otherwise was also taken to be a relevant consideration. It was, in the result, held that, in the circumstances of the case, it was not unnatural for the appellant to look forward to continue his business in as prosperous a way as he had been doing in the recent past and to raise sufficient funds to build his own residential house or to construct a workshop for his own engineering business. The probability that the site might also appreciate in value was held not necessarily to lend itself to the inference that the transaction was a venture in the nature of trade as distinguished from capital investment. Then further in [PRECEDENT] J. (as he then was), speaking for the court with reference to the [ACT], said :
"The expression 'adventure in the nature of trade' is used by the Act in [SECTION]. [SECTION], which defines business as including any trade, commerce or manufacture, or any adventure or concern in the nature of trade, commerce or manufacture. Under [SECTION], tax shall be payable by an assessed under the head 'profits and gains of business, profession or vocation' in respect of the profits or gains of any business, profession or vocation carried on by him. Thus, the appellant would be liable to pay the tax on the relevant amount if it is held that the transaction which brought him this amount was business within the meaning of [SECTION], [SECTION], and it can be said to be business of the appellant if it is held that it is an adventure in the nature of trade. In other words, in reaching the conclusion that the transaction is an adventure in the nature of trade, the Tribunal has to find primary evidentiary facts and then apply the legal principles involved in the expression 'adventure in the nature of trade' used by [SECTION], [SECTION]. It is patent that the clause 'in the nature of trade' postulates the existence of certain elements in the adventure which in law would invest it with the character of a trade or business ; and that would make the question and its decision one of mixed law and fact."
7. It would thus be seen that the answer to the question whether the particular transaction is an adventure in the nature of trade cannot be decided on the basis of any single test or formula. The answer to this must necessarily depend on the total impression and effect of all the relevant factors and circumstances governing the transaction (see [ENTITY] v. Commissioner of Income-tax, ).
8. On the facts found by the Tribunal in this case and referred to by us in the earlier part of this judgment the overall effect and impression that is formed is that the sale by the assessed was not an adventure in the nature of trade. To prove it to be so, the burden lay on the department. Investment in land was not the proper line of the business of the assessed-family. It did not deal in land. Except for the two plots in question the assessed-family was already engaged in another lucrative business. There was no possible reason for it to divert its funds from that business to purchase the two plots with the sole intention of selling them later on. The fact that the assessed-family was committed to acquire shares worth Rs. 25,00,000 in Bharat Tubes fully explained the sale of the plots in question at the time they were sold. These are primary facts found by the Tribunal and we have no hesitation in confirming the conclusion drawn from them that the sale of the plots in these circumstances was not by way of adventure in the nature of trade.
9. Shri [ENTITY], appearing for the revenue urged that, in the background that land prices in Delhi were continually rising, the fact that the assessed-family acquired as many as three plots within a short span of nearly 1 1/2 months showed that its intention was to acquire them by way of commodity for sale and this fact is borne out by its subsequent conduct in selling the two plots. This inference would not be legitimate in the face of the Tribunal's findings of fact that the assessed-family wanted to acquire status and stability by snaking permanent investments in immovable properties and by building a permanent source of property income. Further, even if it be assumed that the plots were purchased as they were considered to be profitable as their price was likely to appreciate, this alone, in law, will not make the transaction an adventure in the nature of trade. Profit-making would normally not be an irrelevant consideration for every honest and prudent purchaser but will not in every case make the purchase a venture in the nature of trade. To bring a transaction within this category it has to be shown that the sole intention at the time of purchase was to sell the property purchased later on at a profit. There is no indication of any such evidence in this case. On the contrary, the finding of the Tribunal is that the assessed possessed considerable resources. It is not inconceivable that if the necessity to acquire shares worth Rs. 25,00,000 in Bharat Tubes had not arisen, it would have arranged for enough capital to raise buildings on these two plots also. Further, the fact that on the plot at Najafgarh Industrial Area, purchased by the assesses at the same time when these plots were purchased, it constructed a building and let it out at a monthly rent of Rs. 3,750 shows that these plots had not been initially acquired for purposes of sale.
10. Shri [ENTITY] then contended that the assessed had no money of its own to purchase these plots and it had to borrow the same. This, the learned counsel said, was a clear indication that the transactions were being entered into by way of ventures in the nature of trade. The argument overlooks the fact that the firm., M/s. Raunaq & Co., from which the loan had been taken by the assessed-family was a firm constituted exclusively by members of the assessed-family. It was their own money in fact, though ostensibly a loan. This fact, therefore, in this case is no indication of the purchase of the plots being a venture in the nature of trade.
11. The learned counsel also urged that the fact that the plots had been sold within about a period of two years of their purchase was an indicator of the assessed's intention to purchase with a view to sell them. The finding of the Tribunal does not support this argument. According to the Tribunal the plots were sold not because their prices had appreciated but because the assessed was in need of money at the relevant time to fulfill its commitment for the huge investment that they had undertaken.
12. The learned counsel cited. [PRECEDENT], [ENTITY] v. Commissioner of Income-tax, [1969] 74 I.T.R. 852 (Delhi.) [ENTITY] v. Commissioner of Income-tax, and [PRECEDENT], and submitted that as per the ratio of decision in those cases the two sales in the instant case should be held to be an adventure in the nature of trade. We have carefully gone through those cases. The facts of these cases and the circumstances attending the transactions in question in those cases were wholly different and do not help the revenue. In Dalmia Cement's case, the question related to the transaction of sale of machinery. The assessed supplied these machineries to Orissa Cement Limited floated by it and the Orissa Government. The cost of the machinery was debited in the books of the assessed to Orissa Cement Limited and credited" to the suppliers at the invoice price. At some later stage, the assessed asked for revaluation of the price owing to rise in price after the machinery had been ordered. The matter was referred to an expert who was of the opinion that the Orissa Cement Limited benefited to the extent of about Rs. 21 lakhs. The Orissa Government had no objection to the Orissa Cement Limited paying the assessed some extra amount. Orissa Cement Limited accordingly passed a resolution sanctioning payment of a sum of Rs. 7 lakhs and in lieu of cash payment allotted fully paid up shares of that value to the assessed. In these circumstances, it was held that when the order was given to the supplier to dispatch the plant it was with the intention of selling it to Orissa Cement Limited and the profit earned was a venture in the nature of trade.
13. In the case of [ENTITY], it was clearly found in the facts of that case that the intention of the assessed in purchasing the land in his own name was not to hold the same for himself but to re-sell it for a profit. It was also found that there was a scheme and a design on the part of the assessed in making the purchase and the organized effort of the assessed to purchase the land and sell it for profit indicated that he dealt with the land as a dealer or a trader. The transaction in those circumstances was held to be an adventure in the nature of trade.
14. In the third case of [ENTITY] cited by the learned counsel, the appellant purchased a huge area of land forming part of an estate. He then divided the land into 23 plots and arranged for the sale of 22 plots to different purchasers retaining the 23rd plot for himself. The land was apparently purchased with a view to sell. The transaction was therefore, held to be an adventure in the nature of trade.
15. In the last case cited by the learned counsel, [PRECEDENT], the correspondence relied upon by the appellant firm and the other attendant circumstances showed that the purchase of the Brengun Factory, which was the property involved in that case, was not an investment to develop it as an industrial estate. The Supreme Court, therefore, held that this was an adventure in the nature of trade in the course of profit making scheme and was not a capital gain. These cases, therefore, in our view do not help the revenue.
16. In view of the aforesaid discussion, our answer to the question referred for opinion is that, in the facts and circumstances of this case, the excess price realised by the assessed by the sale of the two plots in defense Colony could not be regarded as profit accruing from adventure in the nature of trade. Having regard to the questions involved, the parties are left to bear their own costs.