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 - Assessment year 1952-53 - Whether habit by itself does not constitute a trade or an adventure in nature of trade - Held, yes - Whether in absence of any finding that purchase and sale of houses by assessee, a money-lenders, was in course of trade or constituted an adventure in nature of trade, no tax liability could be attached to amount representing difference between purchase and sale prices of houses - Held, yes FACTS The assessee, a money-lender, sold two houses. The ITO being of opinion that the purchase of the houses was wholly with a view to dispose of them at an opportune moment and that the assessee purchased the houses as an ancillary activity to the primary business activity of money-lending, brought the total amount to tax as income from business. The AAC confirmed the order of the Income-tax Officer. The Tribunal, while dismissing the assessee's appeal, stated that there was abundant evidence to show that the assessee habitually bought and sold properties and, therefore, the profit realised on these properties was also liable to tax. On reference : HELD Habit by itself does not constitute a trade or an adventure in the nature of trade. What the Tribunal should have found, with reference to the materials, if any, before it, was whether the two sales could be regarded as in the course of trade or an adventure in the nature of trade. No doubt, the Tribunal said that the assessee was a habitual dealer in properties, but this statement in the case was not supported by any material on record. In the absence of a finding by the Tribunal that the purchase and sale of the houses was in the course of a trade in property or constituted an adventure in the nature of trade, no tax liability would attach to the sum, representing the difference between the purchase and sale price of the two houses. Note : The decision was in favour of the assessee. CASE REVIEW Graham v. Green [1925] 9 TC 309/[1967] 64 ITR 166 (Mad.) JUDGMENT Veeraswami, J.-This reference relates to the assessment year 1952-53 and the questions we are…

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