Case: Oriental Investment Company Limited Vs. Commissioner of Income Tax, Bombay

fact and that a finding of fact without evidence to support it or if based on relevant and irrelevant matters is not unassailable.30. The limits of the boundary dividing questions of law were laid done by this Court in Meenakshi Mills Ltd., v. Commissioners of Income Tax, Madras, 1956 S C R 691 : ((S) A I R 1957 S C 49) (R) where the question for decision was whether certain profits made and shown in the name of certain intermediaries were in fact profits actually earned by the assesses or the intermediaries. Taking the course of dealings and the extent of the transaction and the position of the intermediaries and all the evidence into consideration the tribunal came to the conclusion that the intermediaries were dummies brought into existence by the appellant for concealing the true amount of profits and that the sales in their name were sham and factious and profits were actually earned by the assessee. The test laid down by this Court is to be found in the various passages in that judgment. At p. 701 (of S C R): (at p. 55 of A I R). Venkatarama Ayyarm J., pointed out that questions of fact are not open to review by the Court unless they are unsupported by any evidence or are perverse. At p. 706 (of S C R): (at p. 58 of A I R) it was observed :"In between the domains occupied respectively by questions of fact and of law, them is a large area in which both these questions run into each other. The questions that arise for determination in that area are known as mixed questions of law and fact. These questions involve first the ascertainment of facts on the evidence adduced and then a determination of the rights of the parties on an application of the appropriate principles of law to the facts ascertained."The law was thus summed up at p. 726 (of S C R) (at p. 68 of A I R):1. When the point for determination is a pure question of law such as construction of a statute of document of title, the decision of the Tribunal is open to reference to the Court under S. 66 (1).2. When the point for determination is a mixed question of law and fact, while the finding of the Tribunal on the facts found is final its decision as the legal effect of those finding is a question of law which can be reviewed by the Court.3. A finding on a question of fact is open to attack under S. 66 (1) as erroneous in law if there is no evidence to support it or if it is perverse.4. When the finding is one of fact, the fact that it is itself an inference from other basic facts will not alter its character as one of fact.31. In the instant case the Appellant Tribunal in its appellate order has set out the amount of profits made by the assessee company in the years of assessment 1943-44 to 1948-49. It has also mentioned the inconsistent positions taken up by the assessee in first claiming to be a dealer and then to be an investor which according to the tribunal was due to the fact that it was incurring losses in the earlier years and had begun making profits when the claim of being an investor was put forward. But the two basic facts on which the Tribunal has based its findings are :1. the objects set out in the memorandum of association of the assessee company.2. the previous assertion by the assessee company that it was a dealer in investments and not merely an investor. Counsel for the assessee relies on the decision of Kishan Prasad and Co. Ltd. v. Commr. of Income-tax, Punjab, 1954-27 I T R 49 : ((S) A I R 1955 S C 252) (S) where this Court held that the circumstances whether a transaction is or is not within the powers of the company has no bearing on the nature of the transaction or on the question whether the profits arising therefrom are capital or revenue income and, therefore, it is contended that the Tribunal had relied upon an irrelevant circumstances.Counsel for Revenue on the other hand refers to the judgment in Lakshminarayan Ram Gopal v. Government of Hyderabad, 1954-25 I T R 449 at p.461 : (A I R 1954 S C 364 at p. 369) (T) where the objects of an incorporated company were held not to be conclusive but relevant for the purpose of determining the nature and scope of its activities. Merely because the company has within its objects the dealing in investment in shares does not give to it the characteristics of a dealer in shares. But if other circumstances are proved it may be a relevant consideration for the purpose of determining the nature of activities of an assessee. Whether in the instant case it will have any relevance because of other materials on which the assessee company was relying in support of its case that it was merely an investor and not a dealer will have to be considered when the suggested questions of law are answered.32.As to what are the characteristics of the business of dealing in shares or that of an investor is a mixed question of fact and law. What is the legal effect of the facts found by the Tribunal and whether as a result the assessee can be termed a dealer or an investor is itself a question of law.33. The questions of law that arise out of the order of the Tribunal.1. Whether there are any materials on the record to support the finding of the Income Tax officer that the assessee company was a dealer in shares, securities and immoveable property during the assessment year in question?2. Whether the profits and losses arising from the sale of shares, securities and immoveable properties of the assessee company can be taxed as business profits?

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]25. A review of these authorities shows that though the English decisions began with a broad definition of what are questions of law, ultimately the House of Lords decided that a "matter of degree" is a question of fact and it has also been decided that a finding by the Commissioners of a fact under a misapprehension of law or want of evidence to support a finding are both questions ofresult of the authorities is that inference from facts would be a question of fact or of law according as the point for determination is one of pure fact or a mixed question of law and fact and that a finding of fact without evidence to support it or if based on relevant and irrelevant matters is not unassailable.In the instant case the Appellant Tribunal in its appellate order has set out the amount of profits made by the assessee company in the years of assessment9. It has also mentioned the inconsistent positions taken up by the assessee in first claiming to be a dealer and then to be an investor which according to the tribunal was due to the fact that it was incurring losses in the earlier years and had begun making profits when the claim of being an investor was put forward. But the two basic facts on which the Tribunal has based its findings are :1. the objects set out in the memorandum of association of the assessee company.2. the previous assertion by the assessee company that it was a dealer in investments and not merely an investor. Counselfor the assessee relies on the decision of Kishan Prasad and Co. Ltd. v. Commr. of27 I T R 49 : ((S) A I R 1955 S C 252) (S) where this Court held that the circumstances whether a transaction is or is not within the powers of the company has no bearing on the nature of the transaction or on the question whether the profits arising therefrom are capital or revenue income and, therefore, it is contended that the Tribunal had relied upon an irrelevantfor Revenue on the other hand refers to the judgment in Lakshminarayan Ram Gopal v. Government of Hyderabad,I T R 449 at p.461 : (A I R 1954 S C 364 at p. 369) (T) where the objects of an incorporated company were held not to be conclusive but relevant for the purpose of determining the nature and scope of its activities.Merely because the company has within its objects the dealing in investment in shares does not give to it the characteristics of a dealer in shares. But if other circumstances are proved it may be a relevant consideration for the purpose of determining the nature of activities of an assessee. Whether in the instant case it will have any relevance because of other materials on which the assessee company was relying in support of its case that it was merely an investor and not a dealer will have to be considered when the suggested questions of law are answered.32.As to what are the characteristics of the business of dealing in shares or that of an investor is a mixed question of fact and law. What is the legal effect of the facts found by the Tribunal and whether as a result the assessee can be termed a dealer or an investor is itself a question of law.