Law: Income Tax Act, 1922

Section: 66(2)

Income-tax-Reference-Question whether comprehensive-How to be decided-Whether transaction is an investment or trading activity--Whether a question of fact-Legal requisites of business Factual finding of Tribunal - Whether can be disturbed in reference, -Indian Income-tax Act, 1922, :S. 66(2). Whether a question referred to the High Court under section 66(2) of the Income-tax Act, 1922, is comprehensive enough to include other questions not specifically raised will have to be decided in the light of the facts of each case. The question whether a given transaction is an investment or a trading activity is not a pure question of fact but a mired question of law and fact. The presence of commercial motive is a primary legal requisite of trade and purchase and sale as a business deal may be another. Intention to make a profit normally inspires trade and commerce but it may not be the essence of trade. Likewise, habitual dealing is ordinarily indicative of trade or commerce but is not necessarily so. There may be other legal requisites which may have to be satisfied with reference to the character of particu lar transaction in different kinds of trade or businesses. But whether these legal requisites are satisfied or are present will themselves be a mixed question of law and fact. The character of the motive or intention with reference to a transaction is a matter of inference from the other facts. A factual finding of a Tribunal cannot be disturbed in a reference but if, upon a reasonable view of the facts that conclusion could not reasonably be entertained, the bar has no application. The assessee, who was a director of U. Ltd , and whose husband was its managing director, purchased 32,850 shares in V Ltd., on March 31, 1952, and sold them at a loss in January and March, 1953, and paid the sale proceeds to clear off the amounts due by her to U. Ltd. These shares were subsequently purchased by the assessee's husband. The departmental authorities and the Tribunal refused to allow the loss as one arising from business as, in their view, the purchases were as an investment. On a reference to the High Court. Held, (1) that the Tribunal's view on the question was…