SAROJ KUMAR MAZUMDAR versus THE COMMISSIONER OF INCOME-TAX, WEST BENGAL, CALCUTTA.

Citation: [1959] SUPP. 2 S.C.R. 846 · Decided: 04-05-1959 · Supreme Court of India · Bench: NATWARLAL HARILAL BHAGWATI · Disposal: Appeal(s) allowed

Judgment (excerpt)

r959 
May 4. 
• 
846 
SUPREME COURT REPORTS [1959] Supp. 
SAROJ KUMAR MAZUMDAR 
v. 
THE COMMISSIONER OF INCOME-TAX, WEST 
BENGAL, CALCUTTA. 
(N. H. BHAGWATI, B. P. SINHA and J. L. KAPUR, JJ.) 
Income-tax-Assessment-Single transaction of purchase and 
sale of land-If a venture in the nature of trade or capital investment 
-Test-Dominant intention-Onus-Indian Income-tax Act, z922 
(XI of I922), ss. 2(4), IO. 
The question for decision in this appeal was whether a 
single transaction of sale of land measuring about three quarters 
of an acre was an adventure in the nature of trade so as to make 
it liable to income-tax. The assessee appellant, an Engineer by 
profession, was engaged in various business activities including 
that of an engineering firm but, admittedly, had no dealing, 
except the one in question, in respect of land. In 1946 he enter-
ed into an agreement with the Hindusthan Co-operative Insur-
ance Society Ltd. for the purchase of the land in question and 
paid a sum of Rs. 32,748 in two instalments, being 25% of the 
estimated total price of the land. As his construction activities 
declined and the Government, who had requisitioned the land, 
were not immediately releasing it, the appellant sold his rights 
under the agreement to a third party in 1947 and thereby receiv-
ed a sum of Rs. 74,000 odd in excess of the amount paid by him 
to the Society. The land, however, was not released by the 
Government until i949. The Income-tax Officer held that the 
transaction v:.1as an adventure in the nature of trade and the said 
sum was a profit therefrom, taxable under s. IO of the Income-
tax Act, and included it in the assessable income. The Appel-
late Assistant Commissioner, in appeal, held that the assessee, a 
man of means, had intended to purchase the land for his own 
use, and that the motive of profit was entirely absent when the 
purchase was made and that as it was a case of appreciation of 
capital, he was liable to pay Capital Gains ta,x. 
The Appellate 
Tribunal on appeal by the Department, reversed the findings and 
the decision of the Appellate Assistant Commissioner and affirm-
ed that of the Income-tax Officer. After the assessee had 
obtained from this Court special leave to appeal, he made an 
application to the High Court under s. 66(2) of the Income-tax 
Act, which that Court dismissed as being barred by limitation. 
Held, (per Bhagwati and Sinha, JJ., Kapur, J., dissent-
ing) that admittedly the transaction in question being a single 
instance of its kind, and not in the line of the business of the 
assessee, it was for the Department to prove that the dominant 
intention of the appellant, when he entered into the agreement 
with the Society, was to embark on a venture in the nature of 
(2) S.C.R. SUPREME COURT REPORTS 
847 
r959 
trade as distinguished from a capital investment, and they having 
failed to do so, the appeal must succeed. 
Commissioners of Inland Revenue v. Reinhold, 34 T. C. 389, 
Saroj Kumar 
applied. 
Mazumdar 
1:here could. ~e ~o doubt,. as held by the . Court, that the Th• ca:;,.issioner 
question for dec1s1on mvolved m such cases was one of law or a 
mixed question of fact and Jaw. 
G. Venkataswami Naidu and Co. v. The Commissioner of In-
come-tax, A.LR. 1959 S.C. 359, referred to and distinguished. 
The line of demarcation, however, between an isolated trans-
action and a venture in the nature of trade was very thin and 
each case had to be decided on the total impression all its facts 
and circumstances made on the mind of the Judge. 
Case-law reviewed. 
KAPUR, J.-Even though the powers of this Court under 
Art. 136 of the Constitution were very wide, they had to be 
exercised within the limits imposed by its own decisions and one 
such limitation was tqat this Court would not ordinarily inter-
fere on questions of fact. Since the question involved in the 
instant case was a mixed question of law and fact, the facts 
should properly be found by the body whose exclusive function 
under the Income-tax Act was to do so. 
G. Venkataswami Naidu & Co. v. The Commissioner of Income-
tax, A.LR. 1959 S.C. 359 and Dhakeswari Cotton Mills v. The 
Coihmissioner of Income-tax, [1955] l S.C.R. 941, referred to. 
Nor could an assessee be allowed to by-pass the procedure 
prescribed by ss. 66(1), 66(2) of the Income-tax Act to-have ques-
tion of Jaw determined. 
Since, however, the Appellate Tribunal had, in the instant 
case, failed to consider certain essential facts, the case 

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