JANKI RAM BAHADUR RAM versus COMMISSIONER OF INCOME TAX, CALCUTTA

Citation: [1965] 3 S.C.R. 604 · Decided: 31-03-1965 · Supreme Court of India · Bench: K. SUBBA RAO · Disposal: Appeal(s) allowed

Cited by 1 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

JANKI RAM BAHADUR RAM 
v. 
COMMISSIONER OF INCOME TAX, CALCUTTA 
March 31, 1965 
[K. SUBBA RAO, J. c. SHAH AND s. M. Suau, JJ.J 
In<iian Income-tax Act, 1922 (11 of 1922), s. 10-Purcluise of a 
different business-Sale-Profit-If taxable. 
The assessee who was dealing in <iron scrap and hardware had 
purchased a jute press and sold it at a profit. The Income-t!IX Officer 
brought to tax in the hands of the assessee, the profit arising out of 
this sale. The Appellate Tribunal modified the order and reduced the 
total income. At the instance of assessee the Tribunal referred to 
the High Court, the question, whether the surplus received by the 
assessee as a result of the sale of the jute press arose out of an ad-
venture in the nature of trade and was, therefore, liable tc tax. The 
High Court answered the question In affirmative. In appeal; 
HELD: The question must be answered in the negative. 
Granting that the assessee made a profitable bargain when he 
purchased the property and granting further that the assessee had, 
when he purchased it, a desire to sell the property, if a favourable 
offer was forthcoming, these could not without other circumstances, 
justify an inference that the assessee intended by purchasing the 
property to start a venture in the nature of trade. {609H-610A] 
A profit motive in entering a transaction is nQ decisive, for, an 
accretion to capital does not become taxable income, merely because 
an asset was acquired in the expectation that it may be sold at a 
profit. [608F] 
Purchase of the property by the assessee was an isolated transac-
tion not related to the business of the assessee. [608G] 
Case law referred to. 
. CIVIL APPELLATE JURISDICTION: 
Civil Appeal No. 308 of 
1964. 
Appeal by special leave from the judgment and order dated 
September 10, 1962 of the Calcutta High Court in Income-tax 
Reference No. 115 of 1957. 
A. V. Viswanatha Sastri, B. Sen Gupta and P. K. Ghosh, for 
the appellant. 
N. D. Karkhanis and R. N. Sachthey, for the respondent. 
The Judgment of the C,ourt was delivered by 
Shah, J. The appellant .is a Hindu undivided family and 
carries on business as a dealer in "iron scrap and hardware". 
Messrs. Hoare Miller and Company Ltd.-hereinafter called 'the 
Company'-were owners of a jute pressing factory installed on 
a piece· of land belonging to the Company. Adjacent to that land 
were two pieces of land: one was leasehold, and the other held 
by the Company as a licensee from the Government of West 
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JANKI 11AM: v. c. I. T. (Shah, J.) 
Bengal. On January 21, 1941 the Company leased out to one 
Ramnath Bajoria the jute pressing factory together with the 
machinery standing on the land owned by the Company for ten 
months commencing from January 10, 1941. Ramnath Bajoria 
failed to vacate and deliver up possession of the premises de-
mised to him, after the expiry of the period of the lease, and the 
Company instituted a suit in ejectment against him. 
By an agreement dated October 31, 1942 the appellant agreed 
to purchase all the rights of the Company in the factory and the 
appurtenant premises for Rs. 2,45,000. On November 14, 1942 
the Company delivered to the appellant possession of the property 
agreed to be sold, save and except the factory demised under 
the lease to Ramnath Bajoria and the machinery included in the 
lease. On February 26, 1943 the Company executed a conveyance 
in favour of the appellant conveying the factory and the appur-
tenant premises. 
On June 12, 1943 the appellant agreed to sell to one Ranada 
Prasad Saha the property purchased from the Company for 
Rs. 4, 73,364 I 3 I 6 free from all encumbrances. On August 10, 
1943 the appellant was substituted as a plaintiff in the suit filed 
by the Company against Ramnath Bajoria, and obtained posses-
sion of the factory premises. By a deed of conveyance dated 
September 30, 1943 · the appellant conveyed to Ranada Prasad 
Saha the factory and the appurtenant premises and delivered 
possession thereof. In the deed of conveyance the property sold 
was described in three separate Schedules. Schedule I; Press 
House, bffice, residential buildings and three warehouses on land 
owned by the Company: Schedule II; leasehold land together 
with a warehouse known as Kalibari godown: Schedule III; 
two warehouses on land held as licensee by the Company from 
the Government of West Bengal. 
The Income-tax Officer, District II(!), Calcutta, brought t

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