- (1.) This appeal by special leave is directed against the judgment of the Delhi High Court dated April 28, 1970 in a reference made by the Income-tax Appellate. Tribunal (Delhi Bench A) under Section 66 (1) of the Income-tax Act, 1922, hereinafter referred to as the Act, in respect of the following question,- "Whether on the facts and circumstances of the case the sum of Rs. 7 lakhs received from M/s. Orissa Cement Ltd. was pursuant to an adventure in the nature of trade and as such taxable under the Indian Income-tax Act, 1922 - The High Court has answered the question in the affirmative.
(2.) We shall refer to the facts giving rise to the controversy in some detail when we state them in a chronological order it may be mentioned, meanwhile, that the Dalmia Cement Ltd., hereinafter called the appellant, owned certain cement factories and it placed an order for the supply of four complete units of cement manufacturing machinery with M/s. F. L. Smidth and Co., Copenhagen, on February 7, 1946, to increase the production in the following factories,- 1. Shantinagar, 2. Dandot, 3. Dalmianagar, 4. Dalmiapuram. Since the factory in Dandot fell within the territory of Pakistan on is constitution with effect from August 15, 1947, the appellant transferred the machinery which was meant for the Dandot factory (hereinafter referred as the Danot machinery), to a new company known as Orissa Cement Ltd. sometime in 1950-51, and charged only the invoice price which it had paid to M/s. F.L. Smidth and Co. The appellant thereafter asked for a higher price and after some negotiations the Orissa Cement Ltd. agreed on December 4, 1951, to pay a further sum of Rs. 7 lakhs, in lieu of which 70,000 fully paid up ordinary shares of Rs. 10 each were givento the appellant in that company. The Income-tax Officer treated that amount as income earned by the appellant pursuant to an adventure in the nature of trade in 1952-53 assessment year, and taxed it as such. On appeal, the Assistant Appellate Commissioner also held in his order dated September 16, 1958 that the transfer of the Dandot machinery was an adventure in the nature of trade and the payment of Rs. 7 lakhs was a revenue receipt which was rightly taxed by the Income-tax Officer. The matter went up in appeal to the Income-tax Appellate Tribunal (Delhi Bench) which remanded the case to the Income-tax Officer by its order dated September 13, 1960, for report on certain specific points. On receipt of the Income-tax Officer's report, the Tribunal held that the transaction in question was certainly an adventure in the nature of trade and dismissed the appeal. It however drew up a statement of the case, and that is how the aforesaid question of law was referred to the High Court under Section 66(1) of the Act. The High Court held that by the time the appellant placed the despatch order with M/s. Smidth and Co., its intention was to purchase it with an idea to resell and that the fact that it was a single and isolated transaction did not materially affect the case. In reaching that conclusion the High Court took the subsequent developments into consideration, and rejected the contention that the machinery was purchased by way of an investment. The present appeal has been filed against the judgment of the High Court dated April 28, 1970.
(3.) Under Section 10 of the Act, Income-tax is payable by an assessee under the head Profits and gains of business, profession or vocation, inter alia, in respect of the profits and gains of any business carried on by him, and the controversy in this case is whether the receipt of the additional sum of Rs. 7 lakhs, over and above the cost of the Dandot machinery, could be said to arise out of any business of the appellant. The term business has been defined as follows in Clause (4) of Section 2 of the Act:- "(4) 'business' or manufacture or any adventure or concern in the nature of trade, commerce or manufacture." The question in this case is whether the transaction was an adventure in the nature of trade within the meaning of the definition Some decisions have been rendered by this Court on the point, and our attention has been invited to the decisions in Narain Swadeshi Weaving Mills v. Commissioner of Excess Profits Tax, 26 ITR 765 = (AIR 1955 SC 176); Kishan Prasad and co. Ltd. Commissioner of Income-tax, Punjab, 27 ITR 49 = (AIR 1955 SC 252); G. Venkataswami Naidu and Co. v. Commissioner of Income-tax, (1959) Supp 1 SCR 646 = (AIR 1959 SC 359); Saroj Kumar Mazumdar v. Commissioner of Income-tax, West Bengal, Calcutta, (1959) (Supp (2) SCR 846 = (AIR 1959 SC 1252) and Janki Ram Bahadur Ram v. Commissioner of Income-tax,Calcutta, (1965) 3 SCR 604 = (AIR 1965 SC 1898). Even so, no general principle can, for obvious reasons, be laid down to cover all cases of this kind because of their varied nature, so that each case has to be decided on the basis of its own facts and circumstances. It is however well-settled that even a single and isolated transaction can be held to be capable of falling within the definition if it bears clear indicia of trade (vide Narain Swadeshi Weaving Mills v. Commissioner of Excess Profits;G. Venkataswami Naidu and Co. v. Commissioner of Income-tax and Saroj Kumar Nazumdar v. Commissioner of Income-tax, West Bengal, Calcutta (supra). It is equally well settled that the fact that the transaction is not in the way of business of the assessee does not in any way alter the character of the transaction (vide G. Venkataswami Naidu and Co. v. Commissioner of Income-tax, and Saroj Kumar Mazumdar v. Commissioner of Income-tax, West Bengal, Calcutta (supra). It would not therefore help the appellant's case merely to urge either of these points for the answer to the question will depend on a consideration of all the facts and circumstances.;