A.N.RAY, J. - (1.) THE question referred to us was as follows : "Whether, in the facts and in the circumstances of the case the sum of Rs. 1,27,125 received by the assessee as a result of the transaction of purchases and sales of dollars was a trading receipt of a revenue character and as such assessable to income- tax ?"
(2.) IN the asst. yr. 1950-51, the accounting year being the financial year ending on 31st March, 1950, the assessee entered into a contract with Nederlandsche INdische Handels Bank, N. V., hereinafter referred to for the sake of brevity as the Netherland Bank, for the purchase of 90,000 U.S.A. dollars at the rate of Rs. 333-8-0 for each 100 dollars. On 23rd Sept., 1949, the assessee sold the said dollars to the same bank at the exchange rate of Rs. 474-12-0 for each 100 dollars. The ITO brought to tax the sum of Rs. 1,27,125 on the result of the said transaction of purchase and sale. The contentions of the assessee before the Revenue authorities were that it was not the business of the assessee to deal in exchange of foreign currency and, secondly, that the surplus in question was not taxable as it was in the nature of a windfall and a casual receipt. The Tribunal held that the purchase and sale of exchange constituted business transactions, though they were not in the line of business of the assessee. Counsel on behalf of the assessee contended first that the nature of the article was such that there could be no trade having regard to the article. Secondly, the memorandum does not empower the assessee-company to trade in foreign exchange. Thirdly, the company is formed mainly for the purpose of dealing in real estate. Fourthly, this was the only solitary instance when the assessee entered into a contract to buy and sell foreign exchange. Fifthly, it was not in the line of the business of the assessee to buy and sell foreign exchange. Sixthly, no money was paid to the bank initially when the contract was entered into nor was any money paid by the bank except the difference between the two transactions. Seventhly, it was a forward contract. Eighthly, on account of devaluation of the sterling to the dollar and subsequently on account of the decision of the Government to devalue the sterling, there was an unexpected profit and nobody knew that there would be devaluation, and finally the assessee had no organisation or any business of foreign exchange. Counsel for the assessee emphasised that the foreign exchange was acquired with the desire of making gain on the off-chance of a rise in price.
(3.) COUNSEL for the Commissioner contended that under the provisions of s. 4(3)(vii) of the IT Act the exemption from taxation was only in respect of receipt not being receipts arising from business. "Business" is defined in s. 2(4) of the Act as including any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture. An adventure in the nature of trade is, therefore, within the definition of business. It cannot be denied that there can be an adventure in the nature of trade even out of an isolated transaction. The Tribunal in the present case held that the purchase and sale of exchange constituted business transactions. In the case of Radha Debi Jalan vs. CIT (1951) 20 ITR 176 (Cal) : TC12R.505, Chakravartti, J., as he then was, said at page 184 of the report: "It is true that the source need not be trade, but it must nevertheless be an adventure in the nature of a trade and, if trade connotes or implies some continuous activity aimed at producing the profits, such activity must be found even in a case of adventure if the resultant profit is to be treated as taxable business income." ;