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Section 256 of the Income-tax Act, 1961- Reference-Tribunal's finding of fact-Assessee-firm, maintaining accounts on mercantile system, contributed, out of business funds, to a chitty-On termination of impugned chitty after 16 years, assessee received a sum in excess of its contributions representing dividend allowed to various non-prized subscribers of chitty in respect of their contributions-ITO taxed the same-as revenue receipt-Without referring to rules governing chitty-Tribunal came to finding that said receipt was casual in nature and there was no nexus between assessee's business and impugned chitty transactions-Whether tribunal's finding as to nature of chitty transaction was based on speculation and conjecture-Held, yes [case remanded back] Facts The assessee-firm, carrying on the wholesale trade in piece goods, had subscribed, out of its business funds, to a chitty, which commenced on 30-4-1956 and terminated on 30-1-1972, conducted by the L.K. Bank. It did, not bid the chitty at any time during its currency and on its termination, it received Rs. 5,146 as the excess of what it had actually contributed by way of subscriptiohs over the entire duration of the chitty. The said excess amount represented the dividend allowed to various non-prized subscribers in respect of various instalments. It was maintaining its accounts on mercantile basis. For the assessment year 1973-74, relevant for the accounting year ending 15-8-1972, it claimed that the impugned receipt was not taxable as a revenue receipt being only casual or non-recurring in nature. The ITO and the AAC rejected its claim. The Tribunal, however, upheld its claim holding, inter alia, (i) that the accrual of dividend did not depend upon the assessee's volition, but depended entirely upon the bids made by the other subscribers wanting to prize the chitty at a discount; and (ii) that since this was not a case where the assessee had become a subscriber in the chitty for getting finances for his business, any profit arising from the chitty could not be regarded as business income unless a clear nexus was established between the assessee's business and the chitty transaction. On reference : Held The…

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