SAROJ KUMAR MAZUMDAR vs. THE COMMISSIONER OF INCOME-TAX, WEST BENGAL, CALCUTTA.

CIVIL APPEAL No. 347/1955Supreme Court1959 INSC 5204 May 1959Bench: 3 JudgesAuthor: NATWARLAL HARILAL BHAGWATI, BHUVNESHWAR PRASAD SINHA, J.L. KAPUR23 pages
AI SummaryAllowed

What were the facts?

The assessee, an engineer by profession, entered into an agreement in 1946 to purchase approximately three-quarters of an acre of land for Rs. 32,748, paying 25% of the estimated price. Due to declining construction activities and government requisition of the land, the assessee sold his rights under the agreement in 1947 for Rs. 74,000, realizing a profit. The Income-tax Officer (ITO) treated this as an adventure in trade and taxable profit. The Appellate Assistant Commissioner (AAC) held it was a capital appreciation, liable for Capital Gains Tax. The Income-tax Appellate Tribunal (ITAT), on departmental appeal, reversed the AAC's decision and affirmed the ITO's finding. The assessee's application to the High Court under Section 66(2) was dismissed as time-barred.

What did the Supreme Court hold?

The Supreme Court, in a majority decision (Bhagwati and Sinha, JJ., Kapur, J. dissenting), held that the transaction was a single instance and not in the line of the assessee's business. The onus was on the Department to prove that the dominant intention of the appellant at the time of entering the agreement was to embark on a venture in the nature of trade, as distinguished from a capital investment. Since the Department failed to discharge this onus, the appeal was allowed. The Court acknowledged that the question of whether an adventure is in the nature of trade is a mixed question of law and fact. However, Kapur, J., in his dissenting opinion, noted that the ITAT had failed to consider certain essential facts and therefore, the case should be remitted to the ITAT for a proper decision in light of the Court's observations.

What were the issues?

1. Whether a single transaction of purchase and sale of land constitutes an adventure in the nature of trade, making the profit taxable under Section 10 of the Indian Income-tax Act, 1922? (Question of law or mixed law and fact) Assessee's contentions: - The transaction was a single instance and not in the line of the assessee's business. - The dominant intention was capital investment, not trade. - The Department failed to prove the transaction was an adventure in the nature of trade. - Relied on Commissioners of Inland Revenue v. Reinhold, 34 T.C. 389. Revenue's contentions: - The ITAT correctly held the transaction to be an adventure in the nature of trade. - The assessee failed to prove the dominant intention was capital investment. - The High Court dismissed the application under Section 66(2) as time-barred, limiting the scope of appeal.

Which sections of the Income-tax Act were involved?

Section 2(4),Section 10,Section 66(1),Section 66(2)

AI-generated summary — verify with the full judgment below

r959 May 4. • 846 SUPREME COURT REPORTS [1959] Supp. SAROJ KUMAR MAZUMDAR v. THE COMMISSIONER OF INCOME-TAX, WEST BENGAL, CALCUTTA. (N. H. BHAGWATI, B. P. SINHA and J. L. KAPUR, JJ.)

Income-tax-Assessment-Single transaction of purchase and sale of land-If a venture in the nature of trade or capital investment -Test-Dominant intention-Onus-Indian Income-tax Act, z922 (XI of I922), ss. 2(4), IO.

The question for decision in this appeal was whether a single transaction of sale of land measuring about three quarters of an acre was an adventure in the nature of trade so as to make it liable to income-tax. The assessee appellant, an Engineer by profession, was engaged in various business activities including that of an engineering firm but, admittedly, had no dealing, except the one in question, in respect of land. In 1946 he enter- ed into an agreement with the Hindusthan Co-operative Insur- ance Society Ltd. for the purchase of the land in question and paid a sum of Rs. 32,748 in two instalments, being 25% of the estimated total price of the land. As his construction activities declined and the Government, who had requisitioned the land, were not immediately rel

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 10

All 582 judgments and leading authorities on Section 10 →

Recent GST High Court judgments

Search GST case law →