Shah, J. - (1.) M/s. Ram Kumar Agarwalla and Brother - hereinafter called 'the assessees' - were carrying on business at Calcutta as "share-brokers share dealers and paper merchants". Swadeshi Cotton Mills Ltd. - a public limited company operates at Kanpur a large unit producing cotton textiles. It was originally managed by a firm of Managing Agents styled M/s. Horseman Brothers. Some time early in 1946 M/s. Horseman Brothers desired to dispose of their shareholding, in the Company, and to part with the Managing Agency. David Mitchell a partner of M/s. Love lock and Lewis - accountants of the Company - Rowan Hodge of M/s. Orr Dignam and Co.-solicitors of the Company - and the assessees started joint negotiations with M/s. Horseman Brothers to purchase the controlling interest in the Company. About the month of April, 1946 M/s. Mangturam Jaipuria acting through their partner Anandram Gajadhar were also negotiating to secure the controlling interest in the Company. M/s. Mangturam Jaipuria addressed a letter on April 29, 1946 to David Mitchell to the following effect: "With reference to your negotiations to acquire the controlling interest in the Swadeshi Cotton Mills Co. Ltd., we confirm that we and our associates are desirous of purchasing the same and in the event of your securing the same for us and upon your giving up all claims to purchase the same and assigning to us and our associates any interest that you may have acquired therein, we hereby agree to pay you and your colleagues a capital sum of Rs. 6,00,000. Such payment to be made upon completion of the purchase by us." M/s. Mangturam Jaipuria also obtained a letter of guarantee for Rs. 6,00,000 from the Imperial Bank of India in favour of David Mitchell. M/s. Mangturam Jaipuria purchased the share-holding of M/s. Horseman Brothers for Rs. 4,03,00,000. Thereafter the amount of Rs. 6,00,000 was duly paid to David Mitchell, Rowan Hodge and the assessees, and it was divided equally between them - each receiving Rs. 2 lakhs. The assessees paid Rs. 25,000 out of their share to one Ratan Lal Goel for "services rendered in the deal", and credited the balance of Rs. 1,75,000 as "brokerage" in their profit and loss account, and submitted a return of income for the assessment year 1947-48 showing that receipt as income from "brokerage in the course of business" Later, the assessees submitted a revised return excluding the amount of Rs. 1,75,000. The Income-tax Officer rejected the claim of the assessees that the amount of Rs. 1,75,000 was a non-recurring casual receipt exempt from tax under S. 4 (3) (vii) of the Act or that it was a capital and not revenue receipt. The order was confirmed by the Appellate Assistant Commissioner. On the plea of the assessees that the amount of Rs. 2,00,000 received by them as consideration to, agreeing to refrain from carrying on their business and was on that account not taxable as their income, and that in any event- it was a non-recurring casual receipt, there was difference of opinion between the two Members who constituted the Appellate Tribunal, and the appeal was referred to a third Member who remanded the case for a finding on certain matters on which the order of the Appellate Assistant Commissioner was silent. The Appellate Assistant Commissioner then reported that the payment of Rs. 6,00,000 was not made only as an inducement to the assessees to refrain from competition in purchasing the controlling interest in the Company, but it was made to remunerate the services rendered by the assessees and their associates in helping M/s. Mangturam Jaipuria to acquire the controlling interest. The Tribunal agreed with the report of the Appellate Assistant Commissioner and dismissed the appeal. The Tribunal observed: "He never had the intention or the money to buy the Mills worth a few crores. The very fact that he had two other associates will again show that there was no intention of either of these three persons to purchase the Mills. Partners of solicitors and auditors had no intention of buying the Mills. I think that the sum of Rs. 2 lacs has accrued to assessee as a result of a venture in the nature of trade. Services of auditors, brokers and solicitors have been employed in completing the sale."
(2.) The Tribunal submitted a statement of the case on the following two questions, on application by the assessees, under Section 66 (1) of the Income Tax Act: "(1) Whether there was any material on record before the President to give a finding to the effect that the contention of the assessee that it intended to buy the Mills was without any basis whatsoever (2) Was the receipt in question a revenue receipt from a venture in the nature of trade and has it been rightly brought to tax - The High Court of Calcutta held that there was ample material to support the finding of the Tribunal that the receipt in question was a revenue receipt from a venture in the nature of trade. With special leave, the assessees have appealed to this Court.
(3.) Counsel for the assessees says that the two Members of the Tribunal who originally heard the appeal had concurrently held that Rs. 6 lakhs were paid to the assessees and their associates for dissuading them for not competing with M/s. Mangturam Jaipuria and it was not open to the third Member to ignore that finding and to arrive at a different conclusion. We are unable to agree with that contention. On a difference of opinion the appeal in its entirety and not any specific question, was referred to the third Member. Again only the Accountant Member was of the view that the receipt of Rs. 2 lakhs to the assessees arose not in the course of their business, but because they agreed to refrain from competing with M/s. Mangturam Jaipuria in that firm's attempt to acquire the controlling interest in the Company:the Judicial Member did not accept that view.;