Case: M/S. Rajputana Textiles (Agencies) Ltd Vs. The Commissioner Of Income-Tax, Bombay City

carry on business. Sir George Rankin said at p. 81: "The question in such a case a, % the present must be "what is the object of the expenditure?" and it must be answered from the standpoint of the assessees at the time they made it-that is, when they were embarking upon the business of organizing agents for the company."Jones v. Leeming was a case of an isolated transaction. The finding was that it was not in the nature of trade. Commissioner of Inland Revenue v. Reinhold was decided on its own facts. Another case decided by this court upon which counsel for the appellant relied was Saroj Kumar Mazumdar v. Commissioner of Income-tax, West Bengal, Calcutta ([1959] SUPP. 2 S C.R. 846.) but that case was also decided on its own facts and it was held that there was no clear evidence in support of the inference of the Appellate Tribunal that the land was purchased with the sole intention of selling it later at a profit.9. The English and Scottish cases on which the appellant relied were considered by the House of Lords in Edwards v. Bairstow ([1956] A.C. 14.).In that case the assessees who were the respondents embarked on a joint venture to purchase and complete a spinning plant agreeing between themselves not to hold it but to make a quick resale. With that object in view they approached and there were diverse negotiations and the whole plant was sold in about two years time at a profit of about pound 18, 000 and for that purpose incurred commission for help in effecting sales, for insurance and other expenses. The General Commissioners found that it was not an adventure in the nature of trade to justify an assessment to income-tax under Case 1 of Schedule D to the Income-tax Act, 1918. It was held that the facts led inevitably to the conclusion that the transaction was an adventure in the nature of trade and that the Commissioners inference to the contrary should be set aside.10. Counsel for the respondent next relied on a Judgment of this Court in G. Venkataswami Naidu & Co. v. The Commissioner of Income-tax ([1959] SUPP. 1 S.C.R. 646.) in which it was held that the presence of all the relevant factors may help the Court to draw the inference that the transaction is in the nature of trade but it is not a matter of counting the number of facts and circumstances for and against. What is important is to consider the distinctive character and it is the total effect of all the relevant factors that determines the character of the transaction. All these cases are illustrative. As was said by Gajendragadkar, J., in the above mentioned case the totality of circumstances of a case and the pros and cons have to be considered and inference drawn from those facts whether a particular transaction was in the nature of trade or was merely an investment and the resulting excess from the transaction was therefore profit which was taxable or was merely an accretion to the capital. In the instant case the pi of its from the transaction that consisted of buying the Managing Agency of the Mill Company and the block of shares held by the Sassoons were in our view the profits of an adventure in the nature of trade. The two groups, Morarka and Bubnas, put Rs. 20 lacs into the assessee company which was floated for the acquisition of the Managing Agency and shares of the Mill Company which were beyond the holding capacity of the assessee company. That company never intended to hold the whole block of shares. It or its promoters before even entering into the agreement of purchase and during the course of negotiations for the purchase had entered into arrangements with different brokers for the sale of shares or at least of a bulk of those shares which were subsequently sold at a profit and but for that sale the transact-ion could not have been completed by the assessee company. The purchase of shares was not with the intention of holding them, the intention of the assessee was just the contrary and by the sale at a profit of the shares actually sold the assessee company expected to and did finance the completion of the transaction and thus was enabled to secure the Managing Agency and keep 6 lacs shares. This inescapably was a transaction of a commercial nature. It had all the attributes of an adventure in the nature of trade. The contention that dealing in buying and selling of shares was not one of its objects is without substance. The Investigation Commission found that dealing in shares was within the objects of the assessee company and this is one circumstance in the totality of the circumstances which must be considered, though by itself it is not determinative of the question. All the circumstances lead to the inference which was rightly drawn by the Investigation Commission and by the High Court. The answer to the first part of the question referred by the Investigation Commission must therefore be in the affirmative.It was contended that the question should not have been reframed and we have therefore proceeded to answer the question as framed by the Investigation Commission. In our opinion the question even as framed must be answered in the affirmative. The Notice of Motion to raise other questions in the High Court was rightly dismissed. Apart from the fact that the Notice of Motion was barred by time and there was no application for condonation of delay, the questions which were sought to be raised were rightly held either to be covered by the question answered or they did not arise at all. The constitutional question under Art. 14 of the Constitution cannot be raised in these proceedings because as we have said above this Court is exercising its advisory jurisdiction and its power is confined to the questions which arise in an appeal.11.

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

Explanation:
0[ds]The jurisdiction which this Court exercises in appeal is of the same character and therefore any question which was not referred to the High Court cannot be allowed to be raised at this stage. Consequently the constitutional question in regard to discrimination under Art. 14 of the Constitution which is now sought to be raised cannot beis not necessary to adjudicate upon this argument because in our opinion taking the question as referred to be a proper question arising out of the report of the Investigation Commission the answer to the first part thereof would, still be in the affirmative. Inconsidering the question whether the transaction is or is not an adventure in the nature of trade we have to take into consideration the intention of the assessee keeping in view the "legal requirements which are associated with the concept of trade orthe present case the facts as shown were entirelyG. Venkataswami Naidu & Co. v. The Commissioner of Income-tax ([1959] SUPP. 1 S.C.R. 646.) in which it was held that the presence of all the relevant factors may help the Court to draw the inference that the transaction is in the nature of trade but it is not a matter of counting the number of facts and circumstances for and against. What is important is to consider the distinctive character and it is the total effect of all the relevant factors that determines the character of the transaction. All these cases are illustrative. As was said by Gajendragadkar, J., in the above mentioned case the totality of circumstances of a case and the pros and cons have to be considered and inference drawn from those facts whether a particular transaction was in the nature of trade or was merely an investment and the resulting excess from the transaction was therefore profit which was taxable or was merely an accretion to the capital. In the instant case the pi of its from the transaction that consisted of buying the Managing Agency of the Mill Company and the block of shares held by the Sassoons were in our view the profits of an adventure in the nature ofcompany never intended to hold the whole block of shares. It or its promoters before even entering into the agreement of purchase and during the course of negotiations for the purchase had entered into arrangements with different brokers for the sale of shares or at least of a bulk of those shares which were subsequently sold at a profit and but for that sale the transact-ion could not have been completed by the assessee company. The purchase of shares was not with the intention of holding them, the intention of the assessee was just the contrary and by the sale at a profit of the shares actually sold the assessee company expected to and did finance the completion of the transaction and thus was enabled to secure the Managing Agency and keep 6 lacs shares. This inescapably was a transaction of a commercial nature. It had all the attributes of an adventure in the nature of trade. The contention that dealing in buying and selling of shares was not one of its objects is without substance. The Investigation Commission found that dealing in shares was within the objects of the assessee company and this is one circumstance in the totality of the circumstances which must be considered, though by itself it is not determinative of the question. All the circumstances lead to the inference which was rightly drawn by the Investigation Commission and by the High Court. The answer to the first part of the question referred by the Investigation Commission must therefore be in the affirmative.Itwas contended that the question should not have been reframedand we have therefore proceeded to answer the question as framed by the Investigation Commission. In our opinion the question even as framed must be answered in the affirmative. The Notice of Motion to raise other questions in the High Court was rightly dismissed. Apart from the fact that the Notice of Motion was barred by time and there was no application for condonation of delay, the questions which were sought to be raised were rightly held either to be covered by the question answered or they did not arise at all. The constitutional question under Art. 14 of the Constitution cannot be raised in these proceedings because as we have said above this Court is exercising its advisory jurisdiction and its power is confined to the questions which arise in an appeal.