- (1.) The Tribunal, New Delhi, has referred the following question of law under Section 256(2) of the IT Act, 1961, hereinafter referred to as the Act, for opinion to this Court : "Whether the Tribunal was correct in holding that the profit earned on the sale of margarine plant was profit from an adventure in the nature of trade ?"
(2.) The present reference relates to the asst. yr. 1974-75.
(3.) Briefly stated, the facts giving rise to the present reference are as follows : The respondent-company was engaged in the business of manufacture and sale of Desi Ghee, etc. It had purchased a margarine plant from M/s Margarine & Refined Oil (P) Ltd., Bangalore, for a sum of Rs. 1,00,000 sometime in the financial year 1969-70. After the purchase, it was brought to the notice of the board of directors at the meeting held on 6th May, 1969, that the plant had been imported by the Bangalore party many years ago and buyers may not agree to offer a good price as it may be felt that the plant was bad and not usable. It was accordingly suggested that the plant should be properly installed, shown to potential buyers with a view to prove that it could be worked satisfactorily and that its working would yield profits to the prospective buyers. On such facts, the board of directors resolved and authorised for installation of the plant. The chairman of the respondent-company also expressed the desire that as this was going to be a good proposition, the first preference would be given to M/s Amrit Banaspati Co. Ltd., so that it may derive proper benefit from the said plant. Various meetings of the board of directors were held from 5th Oct., 1969, to 11th March, 1974, when it was finally resolved that the plant be sold to M/s Amrit Banaspati Co. Ltd. for a total value of Rs. 3,50,000. In the return for the accounting period relevant to the asst. yr. 1974-75, the respondent-company returned the surplus of Rs. 1,75,255.48 as profit from an adventure in the nature of trade. The assessing authority, however, rejected such claim and treated the surplus as a short-term capital gain. Feeling aggrieved, the respondent-company preferred an appeal before the AAC, who had held that the surplus should be treated as income from adventure in the nature of trade. Feeling aggrieved, the Revenue preferred an appeal before the Tribunal. It may be mentioned here that before the Tribunal a plea was taken on behalf of the Revenue that the AAC had erroneously admitted the additional evidence concerning minutes of various meetings of the board of directors of the respondent-company. The Tribunal restored the matter back to the first appellate authority. After remand, the matter was heard by the CIT(A), who called for the remand report from the ITO. The ITO submitted a report giving his opinion that the surplus by way of sale of plant to M/s Amrit Banaspati Co. was (not) an income from an adventure in the nature of trade and, therefore, the benefit of the set off should not be allowed. The CIT(A), however, did not accept the viewpoint expressed by the ITO in his remand report and once again held the surplus as business profits by relying upon the various minutes of the meetings of the board of directors of the respondent-company, which order has been upheld by the Tribunal.;