LexDALMIA CEMENT LIMITED versus COMMISSIONER OF INCOME TAX, NEW DELHI
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A B c D E F G H 554 DALMIA CEMENT LIMITED v. COMMISSIONER OF INCOME TAX, NEW DELHI September 10, 1976 [A. N. RAY, C.J., M. H. BEG AND P. N. SHINGHAL, JJ.] Income Tax Act, 1922, s. 2(4)-When can a single and isolated sale be a business transaction within the meaning of-Onus probandi 011 the Taxation Department-Initial purchase with intention of advantageous sale-Earning pro- fit on delivery of goods not necessary. In 1946, ·the appellant ordered cement manufacturing machinery from a firm in Denmark, for its f~ctory in Dandot, but long before the machinery was due, the country was parlit10ned and Dando! went to Pakistan. Instead of cancelling his order, the appellant imported the machinery. It was found that the appellant did so with the intention of selling it at a profit, to the Orissa State. At the time of the sale, the appellant charged only the invoice price initially paid by it, bnt later, obtained a profit. The Income Tax Officer treated the profit as income earned pursua.nt to an adventure in the nature of trade, and taxed it as such. The appellant's appeals were rejected by the Appellate Taxation Autho- rities. The inattei' was then referred to the High Court u/s. 66 ( 1) of the income Tax Act, but was dismissed. · "The. appellant contended that making a profit was not. its intention at the time of sale, and that being a single and isolated transaction of purchase and sale, it was not an adventure in the nature of trade within the meaning of s. 2( 4) of the Act, and that the onus of proving anything to the contrary, lay upon the Department. Dismissing the appeal, the Court- HELD : (i) It is well settled that even a single and isolated transaction can be held to be capable of falling within the definition of "business" if it bears clear indicia of trade. The fact that the transaction is not in the way of busi- ness of the assessee does not in an}l way alter the character of the transaction. [556H,-557A] Narain Swadeshi Weaving Mills v. Commissioner of Excess Profits Tax (25 I.T.R. 765), G. Venktttaswami Naidu & Co. v. The Commissioner of Income Tax [1959] Supp. (1) S.C.R. 646, Saroj Kumar Mazumdar v. The Commissioner of Income Tax, West Bengal, Calcutta [1959) Supp. (2) S.C.R. 846 followed. (2) It is a correct proposition of law that as it was a single and isolated 1- .. transaction. of purchase and sale, the onus of proving that it was a transaction "'- in the nature of trade lay on the department. [560 D-E] (3) The appellant had the dominant intention of selling the Dando! machi- nery to its own advantage, and acted with the set purpose of taking an advantage of its position as the owner of the imported machinery. Even if the ·appellant had not earned any profit whatsoever at the time of the sale or very soon there- after, the transaction, in the facts and circumstances of this case, would nonethe- less have been an adventure in the "nature of trade", and a business transaction within the meaning of Section 2( 4) of the Act. [560H, 561B, 562A-B] Narain Swadeshi Weaving Mills v. Commissioner of Excess Profits Tax (Supra), and G. Venkataswami Naidu & Co. v. The Commissioner of Income Tax (Supra) followed. . Kishan Prasad & Co. Ltd. v. Commissioner of Income Tax, Punjab (27, I.T.R. 49), Saroj Kumar Mazumdar v. The Commissioner of l11;co_me Tax, West Bengal, . Calcutta (Supra) Janki Ram Bahadur Ram v. Commissioner of Income Tax, Calcutta [1965] 3 S.C.R. 604. and Ajax Products Ltd. v. Commissioner of lnwrne- Tax, Madras ( 43 I.T.R. 297) distinguished. ... _, ~ . ¥" • DALMIA CEMENT v. COMMISSIONER OF I.T. (Shing!wl, J.) 555 Clv1L APPELLATE JURISDICTION : Civil Appeal No. 1437 of 1971. A (Appeal by Special Leave from the Judgment and order dated 28-4-1970 of the Delhi High Court in Income 'Pax Reference No. 50/ 65) V. S. Desai, Mrs, Leila Seth and Parvee11 Kumar for the Appellant. S. T. Desai & M. N. Shroff, for the Respondent. The Judgment of the Court was delivered by SHINGHAL, J.-This appeal by special leave is directed against the judgment of the Delhi High Court dated April 28, 1970 in a reference B made by the Income-tax Appellate Tribunal (Delhi Bench A) under C section 66 (l) of the Income-tax Act, 1922, hereinafter referred to as the Act; in respect of the following question,- "Whether on the facts and circurnsta nccs of the case the sum of Rs. 7 lakhs received from M/s Orissa Cement Ltd. was pursuant to an adventure in the
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