Patna High Court
Ghanshyamdas Gangadhar vs Commr. Of Income Tax on 22 January, 1953
Equivalent citations: AIR1953PAT265, 1953(1)BLJR232, [1954]25ITR318(PATNA), AIR 1953 PATNA 265
JUDGMENT Sarjoo Prosad, J.
1. In pursuance of an order of this Court dated 3-5-1951, the Appellate Income-tax Tribunal has stated a case in which the question of law which arises for consideration is "Whether, on the facts and circumstances of the case, the nature of activities carried on by the assessee during the accounting period in question is in the nature of business activities".
2. The case arises out of excess profits tax assessment for the chargeable accounting period 1-8-1944 to 9-4-1946. The assessee is a Hindu undivided family which carried on business in piece goods. This business was closed on 31-3-1944, as held by this Court in an earlier proceeding. On this discontinuance of the business the family's assets came to Rs. 2,25,190/-. Out of this amount the assessee deposited a sum of Rs. 1,54,376/- in various banks on interest. Later he withdrew a certain amount for the purchase of colliery shares and still later he withdrew certain ether sums of money in order to make advances from time to time on interest to three persons Dindayal Parmanand of Banaras, Ramkumar Kishorelal of Ranchi and Mohan Lal Pursottamdas of Calcutta. During the chargeable accounting period the assessee received interest from these various sources amounting to a sum of Rs. 13,123/-. Income from, the interest in question was assessed under the Indian Income-tax Act under the head "other sources"; but the appellate Assistant Commissioner allowed relief to the assessee in regard to earned income farom the interest in question.
In response to a notice under the Excess Profits Tax Act the assessee also filed a return for the chargeable accounting period 4-7-1944 to 3-7-1945. He stated in the return that his business had been closed on 31-7-1944, and that he was doing no business at all. Thereafter, he filed a revised return on 28-9-1946, for the chargeable accounting period 1-8-1944 to 9-4-1946 showing the income derived from the interest in question as profits from business and requested that the previous return submitted by him should be cancelled as having been filed under some misconception of law and facts. The Excess Profits-Tax Officer refused to entertain the revised return because he has already passed orders on the basis of the previous one. But on appeal the Commissioner directed a fresh assessment after accecting the return filed by the asses-see. As it has already been stated, in this return he showed a profit on account of business to the tune of Rs. 13,123/- which was the profit derived by him from interest on monies advanced to the various persons mentioned above.
3. The Income-tax officer found that the asses-see had not carried on any business during the chargeable "accounting period mentioned in the re-turn, and the Appellate Assistant Commissioner affirmed his order on appeal. The Tribunal also came to the same conclusion and overruled the contention of the assessee that the income derived by him was on account of any business carried on by the assessee so as to entitle him to any reduction under the Excess Profits Tax Act.
4. Mr. S.K. Mazumdar on behalf of the assesses contends that the income on account of interest derived from the persons named above was income from 'business' carried or by the assessee and the Department was in error in not treating it as such but as mere 'investment'. He submits that so long as the money was lying in bank it might be said that the intention of the assessee was merely to invest the amount, but when he withdrew various sums of money from time to time and made advances to certain persons with a view to earn larger interest, his intention evidently was to carry on money lending business. There is undoubtedly some force in this contention; but then it must be remembered that the question whether the assessee was or was not carrying on business was not a question of law, pure and simple. It was a mixed question of fact and law.
The Tribunal, when dealing with the matter referred to various circumstances from which it came to an inference that the assessee was not carrying on business. It pointed out, in the first place, that the amounts of interest received during the accounting period in question had been received only from three individuals to whom advances were made from time to time, and the rate of interest charged on these accounts was stated to be only 4 1/2 per cent per annum which was only once at the end of the accounting period on a day to day balance. It also observed that there was no particular establishment except the old house for carrying on the business and there was no employee at all for that purpose it also referred to the circumstance that the assessee had not taken out any license under the Money-Lenders Act, in order to carry on the business in question, which presumably the assessee would have done if his intention was to carry on business in a regular fashion. It may be true that some of these factors can be also explained on the hypothesis, as Mr. Mazumdar contends, that they were merely in the nature of investments; but the point is whether this Court on reference should take a different view of the matter even if two views on facts were possible.
The Tribunal is the final Court of facts, and on the facts found this Court would be reluctant to substitute its own inferences of facts provided the inferences made by the Tribunal were equally sustainable. On the one hand, the Tribunal may be justified incoming to that inference on the facts found by it that the assessee really did not carry on any money-lending business having regard to the small scale of the transactions in question, but was merely seeking to improve his investment by making those advances to the persons concerned. On the other hand, it was also possible to take the view that the intention was to carry on money-lending business. One significant fact undoubtedly is, as the Tribunal has observed, that the assessee had not taken out any license for that purpose which the assessee would presumably do if he intended in fact to carry on money-lending business in a regular manner. But in any case it is impossible for us to interfere with this finding of the Tribunal, because the finding is a finding of fact based upon those materials and is not an altogether unjustifiable finding.
5. A large number of authorities have been cited by Mr. Majumdar in support of his contention that an inference arising out of proved facts is an inference of law. That may not necessarily be so in all cases. As I have already held, the question whether the assessee was or was not carrying on business was a mixed question of fact and law and not purely a matter of legal inference, and it was open to the Tribunal on the facts found by it to hold that the assessee was not carrying on any business.
I may in this connection refer to a decision in -- 'Rellim Ltd. v. Vise', (1952 22 ITB Suppl. 51 (A). The appellant company in that case which was incorporated in the year 1938 was empowered under its memorandum of association to purchase, manage, and sell land, buildings and other property. In 1939 the company acquired some houses and garages and about 13 acres of land, and in 1944 it purchased 47 acres of farming land. All these properties were let out by the company to the tenants at rents which constituted its income, up to 1946-47 the company was treated as an investment company and it was granted relief for management expenses accordingly tinder Section 33 of the United Kingdom Income Tax Act, 1918. During the years 1945 to 1947 the company sold two houses, 13 acres of land and the farm, and the company was assessed to income-tax under Schedule D of the said Act in respect of its profits from the sale of land and houses. The Commissioner affirmed the assessment on the ground that the company was a 'trading' company and it was 'trading at a profit'. It was held that the question which had to be decided by the Commissioner was a question of fact and there was evidence on which they could come to the finding at which they had arrived. Wynn Parry, J. in dealing with the case made the following significant observation:
"I have to bear in mind (for this has been laid down in many cases) that not merely is the question one of fact, but in deciding whether or not there is any evidence to support the Commissioner's finding, it is not for the Court to consider how the Court itself would have viewed the matter had it been 'res Integra'. If left free I might well have come to a different conclusion from that to which the Commissioners have come; but unless I can be satisfied that there was no evidence to support their finding, then I am bound to give effect to it".
It cannot be said that in the case with which we are here concerned there was no material to support the finding of the Income-tax Tribunal.
6. For the above reasons, I hold that the answer to the question submitted should be that the view taken by the Tribunal, that in the circumstances of the case the nature of the activities carried on by the assessee was not in the nature of business activities but in the nature of mere investments is correct. In the circumstances there will be no order as to costs.