LexKARAM CHAND THAPAR & BROS. (P) LTD. versus COMMISSIONER OF INCOME-TAX, (CENTRAL) CALCUTTA
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KARAM CHAND THAPAR Ii: BROS. (P) L1D.
v.
COMMISSIONER OF INCOME-TAX, (CENTRAL)·
CALCUTTA
February 20, 1969
[J. c. SHAH, v .. RAMA.SWAMI AND A. N. GROVl!R, JJ.)
8
Income Tax-Single transaction of salt resulting in profit-.,,lun
such profit should be deemed to be revenue liable to tax-lncomt-tax A.•t
(11 of 1922), •. 24(1) and (2)-Sale in one accounting year t:nd ••1111·
ment of price in the succeeding year-Sale resulting in cessation al b&.
ness and in loss-Assessment proceedings for th• latter Y•-lf Ion ..,
C
allowable deduction under s. 24(1).
The assessee-company was carzying on the business of coal minin1· uol
of a Dry Ice Factory, in addition to various other kinds of busineas, Jt
obtained a prospecting licence, and after prospecting for coal sold it wit•-
in a short time of its acquisition and thereby earned profits in the accoua-
ting years 1948-49 and 1949-50. It sold the Ice Factory in 1948. Thoop
the purchaser took possession of the ice factory in 1948, the price was
))
finally settled in December 1949. By that sale
the
assesseo-compaay
suffered a loss.
The assessee claimed : ( 1) that the profits were gains of a capital
nature and hence not liable to tax; and (2) that the loss was deductiblo
from its income in the assessment year 1950-51.
(I) The department, Tribunal and High Court held that the pr .. 11
E.
·from the sale of colliery were in the nature of rev011ue and were liable '°
tax under the Income Tax Act, in the two corresponding asses.went yean,
namely, 1949-50 and 1950-51; and
(2) It was held that Joss in the ice factory transaction was suJrerl<I
in the accounting year 1948-49 and assessee's claim could be sustainlll
only under s. 24( 2), elf the Income tax Ac~ 1922, but that the ....
section was not applicable, because, the business ceased completely bclon
y
the commencement of the following accounting year 1949-50 (usesalllHt
year 1950-51).
In appeal to this Court,
HELD : { 1 ) Where a person disposes of a part or the whole of llis
a·ssets the general rule is that the mere c;hange or realization of an iutMt-
ment d0es not attract liability to income tax, but, where such a realiaatiOll.
is an act which in itself is a trading transaction, profit earned by· sale or
G
conversion is taxable. In determining whether the gain is realization of
a mere enahancement of value (capital gain) or is a gain made in H.
operation of business in carrying out a scheme for p~ofit"!"akin.g (revenue)
no uniform rule can be evolved. Though a transaction IS an 1Solated ODO,
it may be intimately related to the normal business of the tax-payer. h
such a case, the profit arising from the transaction will be out of the tax
payer's business and will be assessable as business profits. (799 C-D, P;
800 B..CJ
H
Prospecting of coal was a part of the mining .busintJS which ,tile
assessee was carrying on. Therefore, the
transaction of p~
developing and selling the colliery was one in )he nature of · ~.
I:. C. THAPAR a: BROS. v. C.I.T. (Shah, J.)
797
A
Hence, the profit arising from the oale, thoogh it was an isolated transac-
tion, was in the nature of revenue and liable to tax. [801 F-H]
B
c
D
E
F
G
H
Janki Ram Bah4dur Ram v. Commi&rioner of lncom•-tax, 57 l.T.ll.
21, 2S(S.C.), followed.
Commissioner of Tax'S v. M•lbour,.. Trust Ltd. [1914] A.C.
1001,
1010 (P.C.), Califorrncn Copper Syndicat• (Limited and R•duc•d)
v.
Harris (Surv•yor of Tax.s) S T.C. 159, 166, Imperial Tobacco Co.
v.
Kelly, 25 T;C. 292, Beynon & Co. Ltd. v. Ogg (Surveyor of Tax'1)
7
T.C. 125 and Glouc.si.r Railwa,v Carriag• and Wagon Co. Ltd. v. Com-
mi.uioners of Inland Rev.nu•. 12 T.C. 720, referred to.
(2) By s. 24(1) the loss or profits or gains suffered under any bead
in any year was liable to be set off in that year against the income, prollta
or gains under any other h•cd; but by s. 24(2) where the loss suffered ia
any business, profession or vocation could not be wholly set off under
•uh-•. (I) the loss not so set off has to be carried forward to the follow-
ing year and set off against the profits and gains of th• scm• bus;,..., ia
the •ubsequent year. [802 F-G]
In the present case, loss was suffered in the accounting year 1949-50
when the pbce was settled and not in 1948-49 when the sale took place.
Therefore, under s. 24( 1) the loss was allowable against the busine51 in·
come ot the assessee for the adcounting year 1949-50, that is, in proceed-
inp for the assessmentExcerpt shown. Read the full judgment & AI analysis in Lexace.