Law:

Section:

Section 28(i) of the Income-tax Act, 1961 [Corresponding to section 10(1) of the Indian Income-tax Act, 1922] - Business income - Chargeable as - Assessee, which was carrying on banking business, advanced certain amount to 'R' factory - In order to discharge loan, 'R' factory under an agreement transferred its interest in certain shares and other assets of a match factory - After completion of said transfer assessee started making transfers of property so acquired in bits - Whether acquisition and subsequent sale of property were merely steps in transaction of advancing loan to R factory and realizing loan from 'R' and, therefore, any amount realised in excess of amount due from factory on loan was income arising from a transaction of money-lending business - Held, yes FACTS In pursuance of its objects, the assessee carrying on banking business advanced certain amounts to R factory. This loan kept on mounting up and in order to discharge the loan, the factory entered into an agreement with the assessee transferring its 3/4th interest in the shares and assets, etc. including lands, buildings, and godown of a match factory. Under the deed of transfer, all the income of the factory from this property was to be its income up to 31-12-1939, but thereafter it was to be the income of the assessee. After completion of the transfer the assessee started making transfers of the property so acquired in bits. The amount realised by these transfers together with the sum of Rs. 4,779-8-0 which was the book value of the residue of the property left with the assessee exceeded the cost value of the property. The ITO holding it to be the profits of the business of the assessee in the nature of a revenue receipt, assessed income-tax on it. On appeal, the AAC as well as the Tribunal upheld the order of the ITO. On reference : HELD Ordinarily the question whether a certain property was acquired and sold in the course of a transaction entered into when carrying on a particular business such as money-lending business is a question of fact. There can be no doubt that when inferences have to be drawn from facts proved, the question whether those inference could or could not be drawn can…

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