V.BHARGAVA,J. - (1.) THIS is a reference by the Income -tax Appellate Tribunal under Section 66(1), Income -tax Act. The assessee is a limited Banking Company having among its objects the following. Clause (a) To give loans or advances on personal or other security and to carry on banking business generally. Clause (c) To acquire by purchase, lease, exchange or otherwise any movable or immovable property and any rights or privileges which the company may think necessary or convenient with reference to any of the objects for which the company is established or the acquisition of which may seem calculated to ensure any immediate or remote advantage to the company. Clause (g) To sell, improve, manage, develop, exchange, lease mortgage, dispose of, turn to account or otherwise deal with all or any part of the property of the company and to sell and to realise the proceeds of sale of any movable or immovable property of the company.
(2.) THOUGH according to Clauses (c) and (g) the objects of the company included acquisition of movable and immovable property which may seem calculated to ensure advantage of the company and to sell, improve, manage, develop, exchange, lease, mortgage, dispose of, turn to account orotherwise, deal with all or any part of the property of the company, the assessee was not actually carrying on these activities as a business. In the course of its business, however, the assessee was advancing loans and one of the loans advanced was a sum of Rs. 38,000/ - at an interest of 6 per cent, per annum as an over -draft to the Rohelkhand Ice Factory. The interest was charged at a reduced rate of 5 per cent. per annum after a certain period. This loan kept on mounting up and in order to discharge the loan, the Rohelkhand Ice Factory entered into an agreement with the assessee transferring its 3/4ths interest in the shares and assets etc., including lands, buildings, and godown of the Match Factory at Bareilly for a consideration of Rs. 75,000/ -. An additional sum of Rs. 1,219/2/ - was also included in the consideration, as this amount had to be spent by the assessee on account of stamp -duty payable on the deed of transfer. Under the deed of transfer, all the income of the Rohelkhand Ice Factory from this property was to be the income of the Ice Factory upto 31st December 1939, but thereafter it was to be the Income of the assessee. This transfer was taken in pursuance of a resolution adopted by the Board of Directors of the assessee company on 18th December 1939, and on the same day another resolution was passed indicating how the taking of this transfer was not going to result in loss to the assessee company, the reason given being that the property was likely to yield an income of 4 per cent. On the 30th December 1939 an entry was made in the accounts of the assessee company debiting Rs. 75,000/ - as costs paid to Rohelkhand Ice Factory for this property. The deed of transfer was actually executed on the 22nd December 1940, and the sum of Rs. 1,219/2/ -of general stamo paper for execution of the deed was debited in the accounts a day earlier as cost of general stamp paper for execution of the deed of transfer and for meeting registration charges. The transfer was actually completed on the 1st January 1941. The assessee started making transfers of the property so acquired In bits. The first of these transfers was made on the 19th December 1941 and there were other transfers on the 26thOctober 1943, 3rd November 1943, 18th January, 1944, 25th May, 1944 and 16th December, 1944. As a result of these transfers the book value of the property which originally stood at Rs. 76,219/ -fell to Rs. 4779/8/ - by the end of the year 1944. The amount realised by these transfers together with the sum of Rs. 4,779/8/ - which was the book value of the residue of the property left with the assessee exceeded the cost value of the property i.e. Rs. 70,219/ - by a sum of Rs. 28,879/ -. This sum of Rs. 28,879/ - was shown as having been realised by the assessee during the year 1944 and the Income -tax Officer, holding it to be the profits of the business of the assessee in the nature of revenue receipt, assessed income -tax on it. In appeal the Appellate Assistant Commissioner as well as the Income -Tax Appellate Tribunal upheld the order of the Income -tax Officer. Thereupon the assessee applied to the Tribunal to state the case for opinion to this Court. The Tribunal has, on the above facts, referred the following two questions: (i) Whether on the above statement of the case and on the construction of its Articles of Association the transaction of purchase of the Match Factory and the subsequent sale of its premises in different bids could legally be held to be a transaction entered into by the applicant in the course of its money lending business? (ii) Whether in the circumstances of the case, the receipts of the applicants by the resale of the premises of the Match Factory were revenue receipts or capital receipts?
(3.) MR . Pathak, learned counsel for the assessee, has addressed arguments at great length to us to make out that this purchase of the property by the assessee and its re -sale in bits were not in the course of the business of the assessee of 'acquiring or selling immovable property' nor was it an adventure in the nature of a trade and consequently the income which arose out of this transaction should not be treated as a revenue receipt. His contention was that this sum of Rs. 28,879 had accrued as profit on a capital investment as a result of the appreciation of the value of property acquired as capital so that it must be held to be capital receipt. This argument of the learned counsel does not appear to us to be relevant in this case as the questions referred to us by the Tribunal are not touched by this point. The income -tax authorities have not taxed the amount of Rs. 28,879 as income from the business of acquiring and selling immovable property nor has it been held by the income -tax authorities that this transaction was an adventure in the nature of trade or commerce. Learned counsel had cited before us the cases of - - 'Seksaria Biswan Sugar Factory Ltd., v. Commissioner of Income -tax (Central) Bombay', : [1950]18ITR139(Bom) . - - 'Commissioner Inland Revenue v. Fraser', (1944) 24 Tax Cas 498 - -'Jones v. Leeming', (1930) AC 415, and - - 'The Commissioner of Inland Revenue v. Hyndland Investment Company', (1929) 14 Tax Cas 694 in support of his arguments. We do not consider it necessary to discuss these cases as they only bear on the question as to whether in this case the transaction of purchases of the shares and assets etc., of the Match Factory by the assessee could or could not be held to be an adventure in the nature of a trade. What the income -tax authorities have held is that the acquisition and sale of this property by the assessee was a transaction entered into by the assessee 'in the course of its money lending business' and it is on thisbasis that the questions have been framed by the Tribunal for reference. We, therefore, need only examine this aspect of the case. ;