CHAKRAVARTTI, J. - (1.) THESE are nine references concerning as many assessments of 8 ladies for, in the case of all of them, the asst. yr. 1945-46, and in the case of one, for the asst. yr. 1946-47 as well. The point involved in all these cases is the same. The question asked is whether a particular sum of money, which was the profit made by the lady concerned from the sale of a block of shares held by her, was a part of her business income, taxable as such or a casual receipt from a source other than business and so exempt from taxation.
(2.) THE proceedings have had a course which, for income-tax cases, is rather unusual. In the Tribunal there was a difference of opinion between the two members, the Lawyer Member holding that the amounts concerned were not taxable and the Accountant Member holding that they were. THEreupon the cases were referred to a third member who happened to be an accountant and he agreed with the Accountant Member for the reasons given by him. THE judgment of the Tribunal must therefore, be taken to be the judgment of the Accountant Member. It is impossible not to remark on the form in which the references have been made. In reality, the Tribunal has submitted only one statement of case which concerns Smt. Radha Debi Jalan. In the remaining cases also, they have purported to submit a statement, but that statement contains no other statement than that the facts are similar, with the only difference that the amount concerned is different. Even the assessment orders have not been included in the paper book. We are told nothing as to whether in the other cases the shares were of the same kind and were purchased on the same date or whether they were sold to the same party or on the same date as the shares belonging to Smt. Radha Debi Jalan. As will appear later, in certain respects at least, the facts are not the same, although the difference might not be such as would affect the decision in those cases. In any event, this Court has a right to expect from the Tribunal that in cases submitted to it for opinion, all the facts bearing upon the case referred should be fully and clearly stated. In the course of the present sittings we have had occasion to come across statements of cases drawn up by this particular Bench of the Tribunal in other cases as well, where we found ourselves greatly embarrassed by the unsatisfactory manner in which the facts were set out and the incorrect or inaccurate form in which the questions referred were framed. Turning now to the facts of the present references, I shall state them first so far as they concern Smt. Radha Debi Jalan. She is the wife of one Kishori Lal Jalan who is a partner of the firm Surajmull Nagarmull and is a member of an HUF bearing the same name. The lady owns a substantial number of shares in the Howrah Trading Company and the remaining shares of that company, although it is a public limited company, are all held by members of the Jalan family, including the ladies to whom the other references relate. The Howrah Trading Company is the managing agent of the Naskarpara Jute Mills Company Ltd., and among its directors are M/s K.D. Jalan and D.N. Jalan, both relations of Smt. Radha Debi. It appears that the Howrah Trading Company held 62,000 shares of the Naskarpara Jute Mills Co. Ltd., and on the 27th May, 1940, it sold out 48,000 of those shares to the eight ladies before us for a total consideration of Rs. 5,28,000. The shares purchased by Smt. Radha Debi were 4,300 in number and the consideration paid by her was Rs. 47,300. The shares were sold at the rate of Rs. 11 per share, although the market price at the time was Rs. 15-10-0. It has now been finally decided that this sale by the Howrah Trading Company of the 48,000 shares was not a bona fide transaction, but a device designed to reduce the excess profits tax liability of the company. The sale of the shares to the eight ladies was on blank transfer forms and the transfers were not registered till 1943. Upto 1943, the dividends paid on these shares were taxed in the hands of the Howrah Trading Company, because the IT Department declined to recognise the transfers till they were registered. Ultimately, in February and March, 1945, all the 48,000 shares were sold away by the ladies. Radha Debi sold her 4,300 shares for Rs. 1,44,788 thus making a profit of Rs. 97,488. The question before us is whether this profit of Rs. 97,488 was a casual or non-recurring receipt, not derived from business, or was a receipt from an adventure in the nature of trade.
(3.) IT is necessary to state a further fact. IT is admitted by the Department, and so it has been found, that so far as Radha Debi, or for the matter of that all the ladies, were concerned, the transaction was an isolated transaction. They were not share dealers, had not sold any shares in the past and have not dealt in any other shares. The ITO included these profits in the assessable income of the ladies on the ground that the amounts concerned constituted income from an adventure in the nature of trade. On appeal, the AAC held that they were capital receipts and so not taxable. The majority of the members of the Tribunal reversed the AAC and agreed with the ITO in his finding that the transaction were adventures in the nature of trade and consequently the profits derived from them were taxable as business income. On the facts already stated, the Tribunal has framed and referred to this Court the following question : "Whether, in the facts and circumstances of the case, the Tribunal was justified in holding that the sum of Rs. 97,488 received by the applicant from the sale of 4,300 shares of Naskarpara Jute Mills Co. Ltd., which is in excess of the purchase price, was income from business as defined in s. 2(4) of the Indian IT Act ?" IT will be seen that the question is limited to the case of Radha Debi Jalan but it is proposed in the remaining statements of cases that we should take the same question as referred in the other cases as well, with the appropriate amounts of profit substituted. The question whether the profits derived from an isolated transaction do or do not constitute taxable income is, except in the plainest of cases, always attended with difficulty. It falls to be decided under three provisions of the Indian IT Act to which reference may be made first. The primary section is s. 10 which provides, to quote only the material portion, that the tax shall be payable by an assessee under the head "profits and gains of business...in respect of the profits or gains of any business carried on by him". Shortly stated, this section provides for taxation of income derived from business. Sec. 2(4) of the Act purports to define what business is, but actually does no more than to say that it "includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture". It will be seen that not only income derived from trade, but income derived from any adventure in the nature of trade is also to be regarded as business income and is therefore taxable under s. 10. The matter is carried a little further by s. 4(3) of the Act. Sec. 4, which deals with the total income of an assessee and enumerates the categories to be included or excluded, provides by sub-s. (3) for a number of exceptions, one of which is contained in cl. (vii) of the sub-section. That clause, read with the opening words of sub-s. (3), provides that "any receipts not being receipts arising from business which are of a casual and non-recurring nature shall not be included in the total income of the person receiving them". This clause provides for the exclusion of receipts of a casual and non- recurring nature, but at the same time provides that if such receipts be receipts from business they will be treated as taxable income. The clause therefore implies that any casual receipt from even an adventure in the nature of trade will be regarded as income and will be assessable to tax. The question before us accordingly is whether the profits made by the ladies from the isolated transaction of sale were, although casual receipts, nevertheless receipts from an adventure in the nature of trade. As already stated, the Tribunal has answered the question in the affirmative.;