1954 (11) TMI 47 - HC - Income Tax

High Court rules against assessee in tax assessment case for 1947-48

Bisheshwar Singh Versus Commissioner of Income-Tax, Bihar and Orissa

The High Court held against the assessee in a tax assessment case for the year 1947-48. The court determined that the assessee's liability to be assessed ... Income from the grain business - profits from molasses permits - Liability to pay tax - nature of trade - expression 'casual' - HELD THAT:- It is proved that the assessee had obtained profit from an adventure in the nature of trade and that the amount of ₹ 37,500 was rightly taxed in his hands by the Income-tax authorities. The assessee obtained profits by sale of the molasses permits which was known and anticipated and worked for by the assessee. The assessee did not obtain the profits in an accidental or fortuitous manner, and it is therefore impossible to accept the argument of Mr. Untwalia that the consideration paid by Mr. Sabir Ali to the assessee was a receipt of a casual nature. In my opinion the argument of Mr. Untwalia on this point must be rejected as unsound. Thus, both the questions referred to the High Court must be answered against the assessee and in favour of the Income-tax Department. Issues Involved:1. Whether the assessee was liable to be assessed in the year 1947-48.2. Whether the profit from molasses permits to the extent of Rs. 37,500 was a casual and non-recurring income within the meaning of section 4(3)(vii) of the Income-tax Act, and therefore not liable to be taxed in the hands of the assessee.Issue-Wise Detailed Analysis:1. Liability of the Assessee to be Assessed in the Year 1947-48:The assessee argued that the previous year for the grain business was from 1st March 1947 to December 1947, not from 1st March 1947 to 31st March 1947 as held by the Tribunal. This argument was based on section 2(11)(c) of the Income-tax Act, which allows the previous year to be the period from the setting up of the business to the 31st day of March next following or another date if the accounts are made up to that date.The court found no material to indicate that the assessee exercised his option to treat the period from March to December 1947 as the previous year. The mere production of accounts for this period was not sufficient to constitute an exercise of option. Therefore, the Income-tax authorities were justified in treating the period from 1st March 1947 to 31st March 1947 as the previous year for the business of the assessee.2. Nature of Profit from Molasses Permits:The second issue was whether the profit from molasses permits was of a casual and non-recurring nature, and thus not liable to be taxed under section 4(3)(vii) of the Income-tax Act. The Tribunal had found that the assessee obtained the permits on 12th March 1947 and sold them to Mr. Sabir Ali by 31st March 1947. The quantity of molasses covered by the permits was 5,400 maunds, indicating a commercial intention.The court examined whether this transaction constituted an adventure in the nature of trade. It held that the profits from the molasses permits were indeed from an adventure in the nature of trade, as there was a clear intention to resell the permits for profit. The court noted that even an isolated transaction could be sufficient to constitute an adventure in the nature of trade.Regarding the argument that the profits were of a casual and non-recurring nature, the court referred to the definition of 'casual' and concluded that the profits were neither accidental nor fortuitous. The assessee had anticipated and worked for these profits, making them taxable under the Income-tax Act. The court also cited the case of Commissioner of Income-tax v. V.P. Rao to support this interpretation.Conclusion:Both questions referred to the High Court were answered against the assessee and in favor of the Income-tax Department. The assessee was liable to be assessed in the year 1947-48, and the profit from molasses permits was not of a casual and non-recurring nature, thus taxable. The assessee was ordered to pay the costs of the reference, with a hearing fee of Rs. 250.Reference answered accordingly.