Law:

Section:

Section 4 of the Income-tax Act, 1961 [Corresponding to section 3 of the Indian Income-tax Act, 1922] - Income - Chargeable as - Assessment years 1946-47, 1948-49 and 1949-50 - Whether mere purchase of properties by a money-lender in discharge of his loans does not automatically lead to conclusion that properties so purchased formed part of stock-in-trade of money-lending business, but said fact should be established by evidence - Held, yes - Whether it is a question of fact in each case whether properties purchased from a source which was originally employed in money-lending business, continued to be part of stock-in- trade after said purchase - Held, yes - Whether burden is upon Department to prove that fact though onus may shift to assessee having regard to other circumstances or presumptions - Held, yes - Whether since there was no evidence to prove that properties purchased by assessee money-lender in discharge of loans to third parties, were treated as stock-in-trade of business, profit made by assessee by selling said properties could not be treated as profit and gain from money lending business and, therefore, was not liable to tax - Held, yes FACTS The assessee was a money-lender. During the course of his business, he advanced loans to several persons. During the depression period, the debtors were unable to repay the advances and, therefore, the assessee took over the debtors' assets, viz., lands, valuing them at a certain sum of money. The debtors' accounts were thus squared off. Later after more than decade when the business conditions improved, the assessee disposed of these lands, in some cases to the previous owners themselves, and in some other cases to outsider. The sales during the assessment years 1946-47, 1948-49 and 1949-50 resulted in surplus of Rs. 8,300, Rs. 8,020 and Rs. 35,000 respectively. The items purchased were not entered in the account as part of the stock-in-trade and no part of the income from the business was utilized to meet any expenditure incurred in connection with the properties so purchased. The sale proceeds of the lands went to swell the money-lending capital and the business continued to be carried on with the…

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