Law: Income Tax Act, 1922

Section: 10(1)

Section 28(1) of the Income-tax Act, 1961 [Corresponding to section 10(1) of the Indian Income-tax Act, 1922] - Business income - Chargeable as - Assessment year 1952-53 - Assessee HUF which carried on money lending business in Malacca purchased property for cash in 1937 on which it spent considerable sum by way of capital expenditure and sold it in 1951 deriving profit which income tax authorities assessed to tax holding that property was stock-in-trade of assessee's business and that acquisition and sale of properties was normal incidence of his business - Whether character of any item of property is determined by mode of its treatment and fact that property in instant case had been acquired for cash and considerable sum was spent on it and it remained in assessee's possession for 14 years showed that assessee had treated it as capital asset and, hence, property was not stock-in-trade of assessee's business, consequently, profit derived by its sale was not assessable to tax - Held, yes FACTS The assessee was a HUF, resident of the former Indian State. It was carrying on money-lending business in Malacca from 1930 onwards. It had purchased properties in Malacca and one of such purchases was an estate A on 25-3-1937, for 23,852 dollars. Between 1931 and 1941 it had purchased twelve properties, two of which were sold in 1940 and one in 1941. Thereafter, there were no purchases of sales. A Estate, which had been bought for cash, was sold in 1951, and it resulted in a profit of 22,802 dollars. This profit was brought to tax by the ITO in the assessment of the assessee for the assessment year 1952-53. The contention that it was a capital accretion was repelled. In appeal, the AAC noticed that the HUF stopped its money-lending business in 1940, that during the course of the existence of that business, certain properties acquired from the debtors in discharge of their debts, represented the assessee's stock-in-trade; that the purchase of property for cash in the above setup represented the stock-in-trade of the assessee's money-lending business, as the surplus cash available in money-lending business was diverted in acquiring this property; and therefore, it would…

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