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Petitioner: A. R. A. AR. KANNAMMAI ACHI VS Respondent: COMMISSIONER OF INCOME-TAX, MADRASHonorable Justice SRINIVASANT. V. Balakrishnan,S. Ranganathan
1964 P T D 755
1964 P T D 755
[Madras (India)]
Before Jagadisan and Srinivasan, JJ
A. R. A. AR. KANNAMMAI ACHI
Versus
COMMISSIONER OF INCOME‑TAX, MADRAS
Tax Case No. 15 of 1959, decided on 9th February 1962.
Business----Adventure in the nature of trade Purchase and sale of property‑Benami purchase of property by judgment‑debtor‑Subsequent sale‑Whether adventure in the nature of trade, Where a judgment‑debtor arranged with another person for the benami purchase of a property and had the property sub sequently sold by private treaty at a higher price Held, the transaction was not an adventure in the nature of trade.
T. V. Balakrishnan for the Assessee.
S. Ranganathan for the Commissioner.
JUDGMENT
SRINIVASAN, J.‑The question referred for the determination of this Court is:
"Whether, on the facts and in the circumstances of the case, the sum of Rs. 17,144 could be taxed as income arising out of an adventure in the nature of trade in the hands of the assessee ?"
The assesee is the widow of one Arumugham Chettiar. She lost her husband when she was a minor. The family consisted of the widow, the mother and sister of the deceased. Her husband was himself an adopted son and the family was involved in litigation and several decrees were being executed against the family properties. In those execution proceedings, the assessee figured as the judgment‑debtor. One of the properties brought to sale was the family residential house. The assessee, in order to save at least that property from being sold away, had that property purchased in the name of one Vaduganathan Chettiar. This person was prevailed upon to take steps through the interven tion of the assessee's father, one Kuppan Chittiar. Vaduganathan Chettiar, accordingly, purchased the decrees against the estate, and in execution of one of such decrees, he himself purchased the residential house in court‑auction. It is not denied at this stage of the proceedings that Vaduganath was only a benamidar for the assessee. The purchase was for Rs. 33,000 or so. Sub sequently, this property was sold to the assessee's sister‑in‑law for about Rs. 50,000 so that a surplus of Rs. 17,144 was realised for the benefit of the widow by this transaction. It is this profit that is sought to be brought to tax in the hands of the widow as profit arising out of an adventure in the nature of trade.
In the orders of the Income‑tax Officer, it is stated:
"In the course of the assessment of Sri AR. VD. Vaduga nathan Chettiar of Paganeri (F. 1910) it is found that certain decrees against the estate of the assessee's deceased husband were purchased by him and realised, resulting in a profit of Rs. 17,144. It was alleged by him that the transactions were done on behalf of the assessee and that he acted as only a benamidar. The contention was not, however, accepted end he has been assessed on the income. An appeal has been preferred by him against the same which is pending. Lest it should escape assessment in the assessee's hands, if it is ultimately held by the appellate authorities that he was only benamidar for the assessee, this assessment is made without prejudice to the posi tion taken that the profit relates to Sri Ar. Vd. Vaduganathan Chettiar.
The assessee contends that the profit itself is not assessable. But, on the facts and circumstances of the transactions, there has been a venture to make profit. The fact that the assessee is the widow of late Arumugham Chettiar is no bar to a venture of this kind, as, in Chetty custom, ladies have their personal interests which are recognised to be quite distinct from other interests in the estates of their husbands."
The Income‑tax Officer, accordingly, brought this amount to tax.
In the appeal the Appellate Assistant Commissioner, after setting out the facts, observed:
"Her only stand is that the surplus of Rs. 17,144 received by her represents capital accretion as the purchase of the decree and the house were not made with a view to profit by resale. They were made with the bona fide object of getting possession of her husband's property. The house had to be sold to her sister‑in‑law as she refused to give possession to the appellant."
Dealing with this contention, the Appellate Assistant Commissioner thought that the motive behind the transaction in question was undoubtedly to gain something for the benefit of the appellant. Without any further discussion of the question, he agreed with the Income‑tax Officer that the transaction in question represented a venture in the nature of trade.
The further appeal to the Tribunal also failed. The Tribunal accepted the argument of the Department that, if there was no profit‑making motive in the transaction, "there was no question of the assessee getting help from the said Vaduganathan Chettiar" and, further, that the resale of the property would have been foremost in the mind of the assessee "even before the assessee resolved to enter into this gamble"; the Tribunal thought that, in view of the strained relationship between the assessee and her sister‑in‑law and mother‑in‑law, the assessee could have had no expectation of getting peaceful possession of the property, and that, even when she purchased the property, she must have had the idea of selling it at a profit. On this reasoning, the Tribunal confirmed the assessment.
It seems to us that the officers of the Department and the Tribunal as well ignored all the material considerations which are necessary to be examined before a transaction can be held to be an adventure in the nature of trade. The case is no different from that of a judgment‑debtor whose properties are being brought to sale in execution of a decree against him. It is notorious that properties do not fetch an adequate price in Court auction. Assuming that the judgment‑debtor arranges with another person for the benami purchase of the properties and has the property subsequently sold by private treaty at a higher price, does that amount to an adventure in the nature of a trade? The position of the present assessee is precisely that and nothing more. Even conceding that she wanted to realise as much as she could out of the property, property in. which she had an interest, how does it make the transaction an adventure in it, nature of trade? She was herself one of the judgment‑debtors. It should also not be forgotten that the property in the present .ease was the family residential house, and no motive of "trading" can possibly be attributed to a judgment‑debtor who seeks to save that item of family property for herself. In this set‑up, in order to obtain either the possession of the property for herself or even to obtain a better price for the property than it would fetch in court‑auction, the assessee, judgment‑debtor, put forward a benamidar to purchase the property and, subsequently, sold it to a third party at a higher price; we are unable to see what indicia of an adventure in the nature of trade exist in the case. Had it been the case of a third party altogether, who purchases properties in court‑auctions and, subsequently, sells them at a profit, one can visualise that the motive that operated upon the mind of such a person was to indulge in transactions that would result in a profit, and even a solitary transaction of that kind may lead to the inference that it was an adventure in the nature of a trade. But, where a person entitled to the property seeks to obtain a better price for the property in circumstances such as set out earlier, it is impossible to imagine how any attributes of a trading venture can be said to exist in such a case. The Tribunal ignored these aspects of the matter. To merely characterise the transaction as a "gamble" does not take the matter further. Even if the assessee all along intended to resell the property, what she was doing was only to get as high a price as she could for her own property which was a capital asset in her hands It is quite conceivable that, but for the obstruction caused to her obtaining possession of the property in the delivery proceedings, it is not unlikely that the assessee would not have sold the property at all.
In our view, the Tribunal's conclusion that this was an adventure in the nature of a trade is entirely unwarranted by the materials on record. The question is, accordingly, answered in the negative and in favour of the assessee. The assessee will be entitled to her costs (Rs. 250).