D. S. MAHAWITHANA, Appellant, and COMMISSIONER OF INLAND REVENUE, Respondent

039-NLR-NLR-V-64-D.-S.-MAHAWITHANA-Appellant-and-COMMISSIONER-OF-INLAND-REVENUE-Respondent.pdf


S. N. G. FERNANDO, J.—Mahawiihana v. Commissioner of Inland Revenue 217
1962Present : H. N. G. Fernando, J., and Herat, J.
S. MAHAWITHANA, Appellant, and COMMISSIONER OF INLAND
REVENUE, Respondent
S. C. 1 of 1962—Income Tax Case Stated BRA (229
Income tax—'1 Adventure in the nature of trade ”—Taxability of profits therefrom—Case stated—Scope and nature of power of Supreme Court to interfere onquestions of fact—Income Tax Ordinance, as. 6 (7) (a), 78.
The assesses-appellant purchased a tea estate for the purpose of soiling itin parts for a profit.
Held that the transaction was an adventure in the nature of trade and,therefore, the profit made from it was taxable under section 6 (1) (a) of theIncome Tax Ordinance.
Held further, that, in a case stated under section 78 of the Income TaxOrdinance, the Supreme Court could consider the correctness of the inferencedrawn by the Board of Review as to the assessee’s intention, only (a) if thatinference had been drawn on a consideration of inadmissible evidence, or aftorexcluding admissible and relevant evidence, (6) if the inference was a conclusionof fact drawn by the Board but unsupported by legal evidence, or ^c) if theconclusion drawn from relevant facts was not rationally possible, and wasperverse and should therefore be sot aside.
Case stated under the Income Tax Ordinance.
H. ' V. Perera, Q.C., with S. Ambalavanar and D. E.for the assesseu-appellant.
V. Dissanayake,
t
A.C.'AUes, Deputy Solicitor-General, with E. D.Crown Counsel, for the respondent.
Wikramanayake,Cur. adv. wit.
June 28, 1962. H. N. G. Fernando, J.—
In this Case Stated under the Income Tax Ordinance the Board of Reviewin paragraph 29 of the case states “ the assessee by his communication on
31.8.1961applied to the Board to have a case stated for the
opinion of the Honourable the Supreme Court on the questions of lawarising in this case and this case is stated accordingly **. The communica-tion mentioned does not satisfactorily set out the questions upon whichthe opinion of the court is sought and parts of it merely contain certainsubmissions as to the manner in which the Board of Review consideredthe Association’s appeal. Having regard to certain observations in anIndian judgment which will be referred to later, the proper form of thequestion of law arising for our consideration is whether “ on the factsand circumstances proved in the case, the inference that the transaction
10—LX IV
*
■B. 6458—1—883 <10/62)
218 H. N. G. FERNANDO, J.—Mahawithana v. Commissioner oj Inland "Revenue
in question was an adventure dr concern in the nature of trade is in lawjustified In view of the various considerations which become relevant,
I think it useful to set out seriatim various transactions in which theassessee was proved to have been concerned :—
The assessee was the owner of the Tismode Tea Factory whereho manufactured tea from “ bought leaf ” but he did not own anyland cultivated with tea.
On 1.10.1954 the assessee made an offer to the proprietors ofBelwood Estate for the purchase of the estate of 583 acres for the sumof Rs. 1,300,000 and forwarded a cheque for Rs. 130,000 as a depositof 10% of the purchase price. On 11.10.1954 the offer was increasedto Rs. 1,335,000 and a further deposit of Rs. 3,500 was made.
. It would appear that one Mr. Wijesinghe assisted the assessee finan-cially to make the deposit, and was in addition himself interested inthe same way as the assessee, though perhaps not to the same extent,in the success of transactions in contemplation when these offers weremade.
Belwood Estate consisted of fields numbered 1 to 12 and ofanother lot described as lot 112. The assessee’s offer was accepted and on_25.11.1954 he entered into a notarial agreement to purchase the estatebefore 1st January 1955. the agreement providing that the depositof Rs. 133,500 would be forfeited if the transaction was not completedbefore the due date.
On 4th December 1954, the assessee and one Soiyed Mohamedexecuted a deed by which Mohamed agreed to purchase from theassessee for the sum of Rs. 730,000 fields 6 to 10 and lot 112. A depositof Rs. 73,000 was then made with the assessee which was liable to for-feit if the purchaser failed to complete the purchase on 31.12.1954.The assessee also agreed in this deed to make or arrange for a loan toMohamed of Rs. 300,000 on the security of the lands covered by theagreement.
On 31.12.1954, which was the last day on which the assesseemight complete the purchase of Belwood Estate, several deeds andagreements were executed :—
The assessee and Wijesinghe of the first part, and the sameMohamed and two others of the second part, agreed thatthe conveyance of Belwood Estate to' be ’ executed by theproprietors would be executed in the name of all these fivepersons, and that the parties would thereafter enter into adeed of partition by which the party of the second part wouldtake fields numbered 3,4,6 to 10 and lot 112, the assessee andWijesinghe taking fields No. 1, 2, 5, 11 and 12. In this deedof agreement it was stated that Mohamed and the other twopersons had contributed Rs. 950,000 of the consideration tobe paid for the purchase of the estate.
H. N. G-. FERNANDO, J.—MaJiaunthana v. Commissioner of Inlav
In accordance with the agreement just mentioned, the
executed the conveyance of Belwood Estate in favoi*five persons, and thereafter these five persons joinet.executing the contemplated deed of partition.
Mohamed and the other two persons mortgaged to the assessee
and Wijesinghe, for a sum of Rs. 100,000, the fields allottedto them in the deed of partition.
The assessee and Wijesinghe mortgaged their fields to
Messrs. Keil & Waldock to cover a loan of Rs. 100,000.
The assessee and Wijesinghe agreed to sell to Mohamed fields
No. 1 and 2 for Rs. 259,000, a deposit of Rs. 100,000 beingthen made by Mohamed, the balance consideration to be paidwithin three months, and the deposit to be forfeited if Moha-med failed to complete the purchase within the three months.(This transaction was duly completed on 31.3.1955 when theassessee and Wijesinghe conveyed fields No. 1 and 2 toMohamed.)
On 23rd February 1955 the assessee agreed to sell to one ShaulHameed, the field No. 5 for R*. 200,000, a deposit of Rs. 20,000 beingmade subject to forfeit if the purchase was not complete on or before31.3.1955. In this agreement too. the assessee undertook to provideor arrange for a loan of Rs. 75,000 on the hypothecation of the field.This transaction was duly completed on 31.3.1955 when field No. 5was conveyed to Shaul He meed and several others.
On 5th May 1955 the Government Agent published a notice ofacquisition covering 40 acres out of fields No. 11 and 12, now belongingto the assessee and Wijesinghe, but on representations made by themthe Government decided to acquire the entirety of both fields, amount-ing to 62 acres and ultimately at the end of the year 1955 they werepaid compensation of about Rs. 129,000.
It was adduced in evidence that the assessee and Wijesinghe wereaware, before an offer was first made to the proprietors of BelwoodEstate, that acquisition by the Government, at least of a small portionof the estate, had been then in contemplation.
In 1954 the assessee borrowed various sums of money as follows:—
30. 1.1954 from Messrs. Shaw Wallace & Hedges a loan of . .
4. 9.1954„
23.12.1954„
33355553
e
>3>33553
from the Bank of Ceylon
„ Messrs. K.eil & Waldock
3331• •
3333••
3333**
3333••
Rs.
90.000
40.000
20.000
15,000
100,000
For the year of assessment 1954/5 and 1955/6 the assessee was assessedto income tax and profit tax on the basis that the amount of the profitsaccruing to the assessee from all these transactions were assessable to tax,and this assessment was confirmed on appeal by the Commissioner.
FERNANDO, J.-—Mahawithana v. Commissioner oj Inland Revenue
. the assessee appealed to the Board of Review, maintaining.0 assessee and Wijesinghe intended to retain for themselves fieldsabered 1, 2, 5, 11 and 12, but that the assessee was compelled by^ „nangcd circumstances to sell the fields Nos. 1, 2 and 5. On this appealthe Board of Review held that the profit was taxable under section 6 (1) (a)of the Ordinance, as profit made in an adventure in the nature of trade.Despite the oral evidence of the assessee and of Wijesinghe, that theyhad intended to retain a part of the property, the Board held that theyhad in fact entertained no such intention and that on the contrary the■ assessee purchased the estate for the purpose of selling it in parts for aprofit. In rejecting this evidence the Board took account of severalmatters.
The assessee’s position before the Board was that he desired to retainsome Tea land for himself because it was difficult to obtain sufficient“ bought leaf ” for his factory and that he intended to utilise the leaffrom the land retained for manufacture in his factory. Firstly the Boardconsidered the explanation given to them by the assessee for his havingsubsequently changed this alleged intention and decided to sell fields1, 2 and 5. Roughly speaking, this explanation was that Mohamed hadin December 1954 threatened to drop out of the whole transaction iffields 1 and 2 were not also sold to him, and that thereafter the assessee * 1
decided to sell fielcTNo. 5 as well because, once lie was deprived of fields1 and 2, there was no purpose in retaining the field No. 5. But on pre-vious occasions quite different explanations had been made by or on behalfof the assessee to the tax authorities. In August 1956 the explanationhad been that fields 1, 2 and 5 had been sold because of the danger ofGovernment acquisition and because the assessee did not want to becaught out with the bad portion of the estate. Again in February 1959a Firm of accountants had stated on behalf of the assessee that the fieldswere sold because tea prices were coming down and because the assesseehad mortgaged his tea factory to raise money for his purchase. Yetagain in June 1960 another Firm of accountants had stated that fields
1 and 2 were retained for a time only because Mohamed and others hadno sufficient funds then (in December 1954) to buy these fields and thatthe assessee and Wijesinghe took over those fields on the agreement•_ that Mohamed would purchase them within threw months. Indeed thislast explanation does appear to me to be the correct one, for it is a per-fectly reasonable explanation having regard to the actual agreement andconveyance covering the two lots.
The Board also held that the assessee’s version that he sold fields 1and 2 because of some threat from Mohamed was a very improbablestory. True it was that, if the transaction for the purchase of BelwoodEstate fell through, the assessee stood to lose the deposit of Rs. 133,000he had made in October 1954 ; but it is equally true that Mohamed wouldin the same event have lost his own deposit of Rs. 73,000, and would thushave been the bigger loser. Counsel for the assessee has argued in thisconnection that the Board of Review does not in its order expressly referto the evidence of two proctors, which in part supports the version that
H. N. G. FERNANDO, J.—Hfaha until ana v. Commissioner oj Inland Revenue 221
on 31st December 1954 the assessee was reluctant to sign the agreementfor sale of lots 1 and 2 although he had earlier agreed orally to do so. Asto these two witnesses, the Board merely states that it has taken theirevidence into consideration.
For the present, it suffices to observe that even if this evidence hadbeen accepted by the Board, it would not have strongly supported theassessce’s evidence that at the initial stage he did intend to retain lots1 and 2.
Another matter dealt with in the Board’s decision has also formed thesubject of complaint. The assessee had maintained that from the starthe had two purposes in view—(1) to retain fields 1, 2, and 5 and (2) todispose of the remainder of the estate. In support of the second limbof his intention he said that, even prior to making the first offer, he hadbeen in contact with the Muslim people who ultimately bought theother fields. The Board, in reaching its conclusion that the assessee hadno intention to retain any part of the land, also took the view that nego-tiations with the Muslim purchasers only took place after 1.10.1954 whenthe first offer was made. In fact there is some support for this view fromthe evidence of the proctor who acted both for the assessee and theMuslim purchasers. But in any event I see no great justification in thecomplaint that the Board wrongly thought that negotiations with theMuslim purchasers had not taken plade before the offer made to the pro-prietors of Belwood Estate. The mere fact that any such early negotia-tion covered only a considerable part of the land, and not its entirety,is of no great assistance in considering whether, having regard to allthe proved facts, the assessee’s intention was either to sell the entiretyas soon as possible or else to retain some acres for himself. Even if theevidence of these prior negotiations had been accepted, all it would haveserved to establish conclusively was that the first offer was made in theexpectation that a large part of the estate could be sold to the peoplewho ultimately did purchase it.
Counsel for the assessee claimed that the Board of Review uTonglydrew the inference that the assessee did in fact intend to sell up theestate in lots, and some of the grounds upon which that claim is basedhave been set out above. There thus arises for consideration the scopeand nature of the power which this court has, upon a Case Stated, toreject conclusions reached by the Board on questions of fact. I havein this connection derived valuable aid from a judgment of the SupremeCourt of India in Naidu & Co. v. The Commissioner of Income Tax 1which dealt with the corresponding functions of the High Court in Indiaupon references of questions of law under section 66 of the India IncomeTax Act, 1922. No excuse is necessary for citing at some length fromthat judgment observations which analyse the problems which can ariseand distinguish lucidly between the different courses open to the court
1 1959 A. I. R. 359 (S. C.)
2*
R 545$ (10/02)
522 H. N. G. FERNANDO, J.—Mahawithana v. Commissioner of Inland Revenue
in different situations. What appears specially pertinent to the considera-tion of the arguments now urged on behalf of the assessee I haveitalicized in citing from the judgment of Gajendragadkar, J. :—.
“ There is no doubt that the jurisdiction conferred on tho HighCourt by section 66 (1) is limited to entertaining references involvingquestions of law. If the point raised on reference relates to the construc-tion of a document of title or to the interpretation of the relevant provi-sions of the statute, it is a pure question of law ; and in dealing withit, though the High Court may have due regard for the view takenby the tribunal, its decision would not be fettered by the said view.It is free to adopt such construction of the document or the statuteas appears to it reasonable. In some cases the point sought to be'raised on reference may turn out to be a pure question of fact; andif that be so, the finding of fact recorded by the tribunal must beregarded as conclusive in proceedings under section 66 (1). If, however,such a finding of fact is based on an inference drawn from primaryevidentiary facts proved in the case, its correctness or validity is opento challenge in reference proceedings within narrow limits. The assesseeor the revenue can contend that the inference has been drawn on consider-ing inadmissible evidence or after excluding admissible and relevantevidence; and, if the High Court is satisfied that the inference is the resultof improper admission or exclusion of evidence, it toould be justifiedin examining the correctness of the conclusion. It may also be opento the parly to challenge a conclusion of fact drawn by the tribunalon the ground that it is not supported by any legal evidence ; or that theimpugned conclusion drawn from the relevant facts is not rationallypossible; and if such a plea is established, the Court may consider whetherthe conclusion in question is not perverse and should not, therefore, beset aside. It is within these narrow limits that the conclusions of fact. recorded by the tribunal can be challenged under section G6 (1). Suchconclusions can never be challenged on the ground that they are basedon misapprcciation of evidence. There is yet a third class of casesin which the assessee or the revenue may seek to challenge the correct-ness of the conclusion reached by the tribunal on the ground thatit is a conclusion on a question of mixed law and fact. Such a conclu-sion is no doubt based upon the primary evidentiary facts, hut itsultimate form is determined by the application of relevant legal princi-ples. The need to apply the relevant legal principles tends to conferupon the final conclusion its character of a legal conclusion and thatis why it is regarded as a conclusion, on a question of mixed law andfact. In dealing with findings on questions of mixed law and factthe High Court would no doubt have to accept the findings of thetribunal on the primary questions of fact; hut it is opqn to the HighCourt to examine whether the tribunal has applied the relevant legalprinciples correctly or not; and in that sense, the scope of enquiryand the extent of the jurisdiction of the High Court in dealing withsuch points is the same as in dealing with pure points of law.”
{at pp. 362 and 363) .
H. N. G. FERNANDO, J-—Mahaunthana v. Commissioner of Inland Revenue 223
It would seem following these dicta, with which I most respectfullyagree, that it is open to this court to reconsider the correctness of theinference drawn by the Board of Review as to the assessee’s intention,only—(a) if that inference has been drawn on a consideration of inadmis-sible evidence, or after excluding admissible and relevant evidence,
(&) if the inference was a conclusion of fact drawn by the Board butunsupported by legal evidence, or
(c) if the conclusion drawn from relevant facts is not rationally possible,and is perverse and should therefore be set aside.
The first of these conditions does not exist in the present case. TheBoard of Review neither considered inadmissible evidence nor excludedadmissible and relevant evidence. It entertained the evidence of thetwo proctors and stated that it had considered that evidence ; and unlessit appears to this court that acceptance of that evidence must necessarilyhave negatived the intention which the Board of Review attributedto the assessee, it cannot be said that the omission to make expressreference to the significance, if any, of the evidence amounted to theexclusion of relevant evidence. The second condition certainly is notpresent, for my opinion will presently be stated that there is amplelegal evidence to support the inference drawn by the Board of Review.Even more untenable would be the plea that the conclusion of theBoard is not rationally possible and was therefore perverse.
The “ picture ” presented by the various transactions detailed at thecommencement of this judgment can fairly be described as follows. Theassessee was in need of money well before he first decided to offer what wasfor him the mammoth sum of nearly 1£ million rupees for the purchaseof Belwood Estate. Before making the offer he wras indebted to Messrs.Shaw Wallace & Hedges in a sum of Rs. 130,000, which was nearlyequivalent to the amount of the forfeitable deposit of 10 per cent, w’hichhe made in October 1954 with financial aid from Wijesinghe. Withinnine days of his signing a firm agreement to purchase, he enteredinto an agreement by which Mohamed became bound to relieve him ofmore that half of his liability, Mohamed at that stage providing acash deposit of more than half the amount which the assessee himselfstood to lose if his own deposit became forfeit. Then, before he comple-ted the purchase, he relieved himself of a further liability in a sum ofRs. 220,000 by the second agreement of sale on 31.12.1954, which nowcovered fields 3, 4, 6 to 10 and lot 112. His interest in persuading othersto purchase these lots is manifested by the undertaking in the first ofthese agreements to procure finance to the extent of Rs. 300,000 forMohamed. Further, on 31st December 1954, the assessee obtained,through the agreement to sell fields 1 and 2, an assurance of undeniablefirmness covering a sum of Rs. 259,000, which w'as accompanied by aforfeitable cash deposit of Rs. 100,000. Indeed on 31st December1954 the effect of all the transactions was that, although he had originallyagreed to purchase 5S3 acres at an average price of Rs. 2,200 per acre,
224 H. N. G. FERNANDO, J.—Mahavnlhana v. Commissioner of Inland Revenue
the assessee in fact obtained title for himself and Wijesinghe only to119 acres at an average price of just over Rs. 1,000 per acre. At thisstage his total liability, which was for him the consideration for obtainingtitle to 119 acres, was only Rs. 125,000. But the result of the nexttransaction covering lot 5 was'that the assessee was thereafter to retainonly fields 11 and 12 which were of an extent of 62 acres. The assessee,when his expectation of Government acquisition of these fields becamea reality, received a further Rs. 129,000, that is at the rate of aboutRs. 2,000 per acre. His total nett gain from all the transactions wasRs. 144,000. The inference reached by the Board of Review, thatthe assessee purchased Belwood Estate with the intention to sell it inlots, was, having regard to the matters just mentioned, amply justified.Indeed it seems equally clear that, if the assessee had not entertainedthat intention, he would not have made his offer fox the purchase of thisestate. That he could himself pay the consideration of Rs. 1,300,000before 1st January 1955 could not have been for him even a dream,since it would appear from the circumstances that even the initial depositwas paid with borrowed funds. The assessee could have had no hopewhatever of completing the purchase except with funds obtained frompersons desiring to buy large shares of the estate.
It is argued for the assessee that, in a case where a person is assessed totax on the basis of an adventure in the nature of trade, the burden lieson the taxing authorities to establish that basis; and that, in order todo so, it must be shown not merely that the assessee hoped to make aprofit and bought with that hope, but rather that his actualintention or dominant motive in malting the purchase was to indulgein an adventure in the nature of trade. I readily agree with thisargument. I adopt also the view expressed by Viscount Dunedin inthe case of Gommrs. of Inland Revenue v. Livingstone1 that where thereis an isolated transaction not in the course of the ordinary trade or busi-ness of the assessee “ the fact that a man does not mean to hold aninvestment may be an item of evidence tending to show whether he isearning on a trade or adventure in the nature of trade in respect ofhis investment, but per se it leads to no conclusion whatever
In the present case I have already expressed agreement with theconclusion of the Board of Review as to the intention with which theassessee agreed to purchase Belwood Estate. The only question whichremains is whether there are additional circumstances which, in con-junction ■with the proved existence of that intention, establish thatthe transaction was an adventure in the nature of trade. The relevantEnglish decisions have been admirably analysed in the Indian judgmentcited above, and it is fortunately unnecessary for me to attempt criticalexamination of those decisions. Many of them held that an individualwho purchased land, albeit with the intention of reselling at a profit,bad not in all the circumstances carried out “ an adventure in thenature of trade”. But the present case seems to me distinguishable,
*1930 A. C. 415.
H. N. G. FERNANDO, J.—Mahaioit liana v. Commissioner of Inland Revenue 225
at least in regard to the major part of the transactions, on the groundthat in regard to that major part there was in fact no purchase by theassessee. In pursuance of the intention, which the Board rightly inmy opinion attributed to him, he agreed to purchase 5S3 acres but infact he ultimately purchased for himself on 31st December 1954 only119 acres. The dictum of Viscount Dunedin cited above refers to theintention not to “ hold an investment ”, but the assessee here certainlymade no “ investment ” whatever covering the 400 odd acres whichconstituted the fields actually sold to others on 31st December 1954,or covered by firm sale agreements. With regard to these fields theoption to purchase which he secured from the proprietors of theestate enabled him to make his profit without himself “ investing ”anything more than the initial deposit which he had made in October1954, far more than half of which had heen “ covered ” hy Mohamed’sdeposit itself. If, as I think, there was never an intention to obtain inhis own name title to the major part of the estate, then there was certainlyan adventure or speculation, not with a view to investing in land,but with a view to exploit the option by the sale of large portions toother buyers. In this view of the matter it seems that the real questionmight be only whether, in regard to the 119 acres to which the assesseeactually got title, it should be said that this part of the transaction wasalso an adventure in the nature of trade. As to this land, comprisingfields 5, 11 and 12, the admission by the assessee and by Wijesinghethat they knew beforehand that the Government contemplated acquisi-tion of a part of the land, and the agreement in February 1955 to sellfield 5, again justified the inference that there was no intention to holdthe land as an investment. One transaction to which I have not referredin the summary given at the commencement of this judgment was a mort-gage by the assessee to Wijesinghe of all his interests for a sum ofRs. 100,000. This mortgageshows thateven the consideration for whichthe assessee apparently purchased the fields was provided only throughfinancial assistance from Wijesinghe and not out of funds available inthe hands of th*e assessee himself. The mortgage of 31.12.1954 in favourof Messrs. Keil and Waldock was apparently one under which the assesseebound himself to deliver the crop to the mortgagees, a point which estab-lishes the untruthfulness of the assessee’s allegation that he wished touse the leaf for his own tea factory. The circumstances in their entiretylead strongly to the conclusion that these 119 acres were retained bythe assessee only because the purchase had to be completed before 1stJanuary 1955 and no outside buyers had been actually procured bythat time.
The assessee had contended before the Board of Review that indetermining whether the transactions constituted an adventure in thenature of trade, the test laid down in the English case of Leemingv. Jones1must be applied and that the Revenue must accordingly show that there
11930 A. 6. 415.
226 EC. N. G- FERNANDO, J.—Mahawilhana v. Commissioner of Inland Revenue
were present such elements as (a) an 5 c organisation ** akin to one ordinarily-engaged in trade of the nature alleged, (6) work done in maturing theasset to be sold and (c) special skill possessed by the assessee and utilisedfor the purposes of the transaction. And before us it was argued thatthere was no evidence before the Board to justify the conclusion thatthese elements had been present. But even if I assume that the parti-cular matters to which the Board refers in this connection do not directlysupport the findings that all these elements were present, the House. of Lords indicated in the more recent case of Edwards v. Banstow1 thatone need not necessarily look in one case for the presence of the preciseelements which had in a previous case influenced a conclusion in favour,of the Revenue. In reversing the finding of fact reached by the Commis-sioners in that case, and in holding that the only reasonable conclusionwas that there had been an adventure in the nature of trade, LordRadclifFc (at page SG) used language which can without difficulty beadapted to the proved circumstances of the case before us. And withmuch respect, I shall attempt such an adaptation —
Here are two persons (the assessee and Wijesinghe) who put up moneyto acquiring an option to purchase a large estate of 583 acres of cultivatedland, paying a cash deposit as a forfeitable advance, and agreeing tocomplete the purchase within a few weeks. They have neither intentionnor financial capacity to pay the large purchase price from funds citherheld by them or to be borrowed for the purpose, so they do not securethe option in order to purchase the estate for themselves. On the contrary,their intention, and the only practical course open, is to dispose of theestate, or as much of the land as possible, to others, before they exercisethe option. Indeed, if they fail to find buyers for the major part of theestate before I) Day, their deposit will be forfeit. They in fact verysoon secure purchasers for extents aggregating 464 acres at a price wellabove the average contract price per acre. They themselves ultimatelypurchase only what remains at an advantageous price, but the assessee’sshare even of this amount is in all probability paid with moneys obtainedfrom mortgages of his interest in the land. Very shortly thereafter,they sell about half of this remaining 119 acres, and what is outstandingis acquired by the Government—an acquisition which they had antici-pated when they acquired their option. And as they hoped and expectedthey make a nett profit on the deal, enjoying the additional good fortunethat they did not need the assistance of brokers or advertisement in orderto carry it through. What else is this, but a deal in land, a successfulcommercial speculation ?
It has been remarked that in a case such as this there are no hard andfast rules governing the construction of a particular transaction or set oftransactions, and that each case has to be considered in the light ofits special circumstances. In the language of the Supreme Court of
11956 A. C. lid.
Solomon v. Mohideen PcUhttmma
227
India in another more recent judgment in Saroj Kumar v. Income TaxCommr.1 the total impression created in my mind in all the circumstancesof the case is that the assessee’s dominant intention when he enteredinto the agreement to purchase Belwood Estate was to embark on aventure in the nature of trade. I would accordingly answer in the affir-mative the question of law as stated at the commencement ofthis judgment.
The Applicant will pay Rs. 500 to the respondent as costs.
Herat, J.—I agree.
Appeal dismissed.