TaxTMI 
TaxTMI 
2005 (10) TMI 63
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....is practically identical in the case of each assessee. The factual matrix of which is not in dispute. The consolidated facts narrated hereafter, taken from the statement of facts forwarded by the Tribunal, are as under: Shri Tushar N. Tanna, Hindu undivided family on November 30, 1978, entered into a contract for the purchase of 2 per cent. National Defence Gold Bonds, 1980 ("NDG Bond" for short) worth 1300 gms. of gold at the rate of Rs. 640 per 10 gms. The delivery of NDG Bonds was, however, not taken for quite some time. In the meantime, the price of NDG Bonds had shown an upward trend in the market. Each of the five assessees in the circumstances, thought it better to opt for purchase of NDG Bonds. The 2 per cent. NDG Bonds which were not exempt from the estate duty, were delivered to Andhra Bank, which was the banker of M/s. S.D. Javeri, broker through whom the gold bonds were purchased by the assessees. Here it will be necessary to point out that except in the case of Shri Tushar T. Tanna, HUF, where these NDG Bonds were delivered by the Andhra Bank to Syndicate Bank, i.e., the assessee's banker, in all other cases the gold bonds remained with the Andhra Bank. The date ....
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.... the facts and circumstances purchase and sale of NDGB under consideration in the case of each of the five assessees was an adventure in the nature of trade. The profit arising from this adventure was, therefore profit from business within the meaning of business as laid down under section 2(13) of the Income-tax Act." The aforesaid findings are the subject-matter of debate whether purchase and sale of NDGB were purchased as a capital investment or adventure in the nature of trade. Submissions: Shri P.J. Pardiwalla, learned counsel appearing for all the assessees urged that in deciding the character of such transactions several factors which are judicially recognised over the years are required to be taken into account while deciding the nature of the transaction. In his submission, if all these aspects were taken into account and applied to the facts of the case at hand by the Tribunal as such the view taken by the Tribunal needs to be respected. Shri Pardiwalla submits that the fact that the NDG Bonds were sold by all the assessees within a short span of time cannot be said to be a sufficient circumstance for the purpose of coming to the conclusion that the transac....
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.... the sole intention of selling it later at a profit. Applying this test, the apex court held that at the time he entered into the agreement with the society the appellant was doing good business, as was shown by the large amounts on which he was assessed to tax, it was not unnatural for him to look forward to continue his business in as prosperous a way as he had been doing in the recent past, and to raise sufficient funds to build his own residential house or to construct a workshop for his own engineering business; and therefore, the probability that the site might appreciate in value did not necessarily lend itself to the inference that the transaction was a venture of trade, as distinguished from a capital investment and that the transaction was not an adventure in the nature of trade and the amount was not assessable to tax under section 10 of the Income-tax Act. The third judgment of the Supreme Court in line is the judgment in the case of Janki Ram Bahadur Ram v. CIT [1965] 57 ITR 21, wherein the Supreme Court observed as under: "No useful purpose would be served by entering upon a detailed analysis and review of the observations made in the light of the relevant facts....
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....judgments of various other High Courts including those of the Madras and Kerala High Courts. In the case of CIT v. Bhandari and Co. [1985] 152 ITR 687 the Madras High Court was dealing with a case where the assessee had declared loss in purchase and sale of National Defence Remittance Certificates. The Income-tax Officer had held that the loss in that case arising out of sale of the certificates could only be treated as having arisen out of the transfer of a long-term capital asset. The Commissioner of Income-tax (Appeals) agreed with the view of the Income-tax Officer. The Tribunal, however, held that purchase and sale of the certificates were not solitary transactions and that the sale and purchase of the certificates having occurred during the normal course of the assessee's business, the loss should be treated as a business loss. Reversing this finding on a reference, the Madras High Court held that the assessee had purchased the certificates from different parties and sold them later to other parties could not by itself establish that it was a line of business that was carried on by the assessee apart from its usual business of import and export. Further section 2(42A) inse....
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....1981] 127 ITR 111 and in CIT v. V.A. Trivedi [1988] 172 ITR 95. Shri Pardiwalla, as already stated hereinabove, brought to our notice one more judgment of this court in the case of Tribhuvandas Vallabhdas v. CIT [1966] 61 ITR 518, wherein the assessee-Hindu undivided family had carried on the business of commission agency and money-lending but did not carry on business in silver on its own account. It purchased 111 silver bars out of which five were used for making utensils and after 7/8 years, remaining were sold on profits. Dealing with this transaction, the Division Bench of this court held that the purchase of silver bars was not with the intention of making investment and the sale of the bars was not for the purpose of any need or under pressure. The transaction of purchase and subsequent sale at profit raised a very strong presumption that it was an adventure in the nature of trade. Further as the purchase was made at the beginning of the war which was expected to cause a rise in the price of silver and the sale was effected at the time when the event had come to an end, it was clear that the object of purchase by him seemed to be to take advantage of an opportunity that h....