Case: Khan Bahadur Ahmed Alladin &amp; Sons Vs. Commissioner Of Income-Tax, Andhra Pradesh

2. The assessment years involved in these appeals are 1358 F., 1953-54 and 1954-55, the relevant accounting periods being the years ending 30th September 1948, 30th September 1952 and 30th September 1953, respectively. The assessee firm Khan Bahadur Ahmed Alladin and Sons (hereinafter referred to as the assessee firm) consists of three partners, Khan Bahadur Ahmed Alladin, and his two sons, Khan Saheb Dost Mohammed Alladin and Noor Mohammed Alladin. The assessee firm purchased the Brengun factory and the properties attached it to consisting of 403 acres of land 14 factory buildings, about one hundred residential quarters and railway sidings furniture, etc., in addition to the stores from the Government of India. The price of the Brengun Factory and the properties together with the furniture etc., was fixed at Rupees 27 lakes while the price of the stores was fixed at Rs. 8 lakhs. During the relevant accounting years, the assessee firm sold a part of the stores for Rs. 9,53,918 o. s. and 46 acres of land, 14 factory buildings furniture, railway siding, etc., for Rs. 26,48,215 o. s. It was not disputed that the excess over the price realised for the re-sale of stores was Rs. 2,26,484 o. s. and for the resale of part of the factory land, building etc. was Rs. 10,46,834 o. s. It was admitted by the assessee firm before the Appellate Tribunal that the surplus realised by the resale of stores was not a capital accretion but an adventure in the nature of trade. With regard to the factory it was argued that it was an investment and not an adventure in the nature of trade and as such the excess amount realised represented a realisation of capital asset. The contention of the assessee firm was rejected by the Income-tax Officer, by the Appellate Assistant Commissioner and by the Appellate Tribunal in appeal. The view taken by the Appellate Tribunal was that the assessee firm had planned a well calculated scheme of profit making, that it had the intention of exploiting the properties which it had purchased to it advantage, that the transactions in question constitute an adventure in the nature of trade, and any surplus which it got by sale of the portions of the properties was liable to tax. At the instance of the assessee firm, the Appellate Tribunal stated a case to the High Court on the following question of lawthe purchase of the site and buildings known as "Brengun factory" was in the course of a profit-making scheme or an adventure in the nature of tradeits judgment dated 23rd July, 1964 the High Court answered the question against the assessee firm.

Court's reasoning:
The answer to the question does not depend upon the application of any abstract rule, principle or formula but must depend upon the total impression and effect of all the relevant facts and circumstances established in the particular case.As we have already said it is not possible to evolve any legal test or formula which can be applied in determining whethera transaction is an adventure in the nature of trade ornot. The answer to the question must necessarily depend in each case on the total impression and effect of all the relevant factors and circumstances proved therein and which determine the character of thefacts establish that the assessee firm had not enough financial resources to invest Rs. 36 lakhs on the Brengun Factory and that the transaction was launched upon with view to make profits and not as a permanent investment.There is another aspect of the matter to be taken into account. The property income from Brengun Factory during the year 1953-54 as would appear from the Assessment Orders of the years 1953-54 1954-55 was about Rs. 22000/- I. G. The interest on loans on over-drafts is said to be 41/2 per cent. On 27 lakhs, the balance of price payable to the Government, the annual interest would be about Rupees 1,21,500/-. It is manifest that the assessee firm could not have borrowed the money to purchase the property as an investment when the income was about 1/6 of the interest payable on the amount borrowed.Having regard to total effect of all the relevant facts and circumstances established in this case we are of the opinion that High Court was right in its conclusion that the purchase of the site and the buildings of the Brengun Factory was an adventure in the nature of trade and was in the course of a profit making scheme and then question was rightly answered by the High Court against the assessee.11. We consider it necessary to add that the statement of the case made by the Appellate Tribunal is unsatisfactory and gives no information whatever about the arguments respectively advanced by the parties or the findings recorded by the Appellate Tribunal.The statement of the case is not intended to be a mere copy of the order sheet in a litigation but it must set out the points raised by the aggrieved party, the reply thereto, if any and the authorities of statutory provisions relied upon for the view taken by the Appellate Tribunal together with an intelligible summary of the facts found by the Appellate Tribunal.A statement of the case should fully, clearly and precisely set out all the relevant facts, or if the facts have been fully set out in the judgment of the Tribunal they may be incorporated in the statement of the case by a reference to particular paragraphs of the judgment in which the facts are so set out.In any event, it is important that the Appellant Tribunal should state clearly its conclusions and findings of fact and should not leave it to the High Court or this Court to deduce the findings or to collect the facts from a large number of documents which are part of the record of the case. A statement of the case which does not set out precisely the findings of the Appellate Tribunal on the questions of law and fact serves no useful purpose. It merely gives an opportunity to the parties to Put forward arguments at the stage of reference which are often untenable.