JUDGMENT
1. The Tribunal, New Delhi, has referred the following question of law under Section 256(2) of the IT Act, 1961, hereinafter referred to as the Act, for opinion to this Court :
"Whether the Tribunal was correct in holding that the profit earned on the sale of margarine plant was profit from an adventure in the nature of trade ?"
2. The present reference relates to the asst. yr. 1974-75.
3. Briefly stated, the facts giving rise to the present reference are as follows :
The respondent-company was engaged in the business of manufacture and sale of Desi Ghee, etc. It had purchased a margarine plant from M/s Margarine & Refined Oil (P) Ltd., Bangalore, for a sum of Rs. 1,00,000 sometime in the financial year 1969-70. After the purchase, it was brought to the notice of the board of directors at the meeting held on 6th May, 1969, that the plant had been imported by the Bangalore party many years ago and buyers may not agree to offer a good price as it may be felt that the plant was bad and not usable. It was accordingly suggested that the plant should be properly installed, shown to potential buyers with a view to prove that it could be worked satisfactorily and that its working would yield profits to the prospective buyers. On such facts, the board of directors resolved and authorised for installation of the plant. The chairman of the respondent-company also expressed the desire that as this was going to be a good proposition, the first preference would be given to M/s Amrit Banaspati Co. Ltd., so that it may derive proper benefit from the said plant. Various meetings of the board of directors were held from 5th Oct., 1969, to 11th March, 1974, when it was finally resolved that the plant be sold to M/s Amrit Banaspati Co. Ltd. for a total value of Rs. 3,50,000. In the return for the accounting period relevant to the asst. yr. 1974-75, the respondent-company returned the surplus of Rs. 1,75,255.48 as profit from an adventure in the nature of trade. The assessing authority, however, rejected such claim and treated the surplus as a short-term capital gain. Feeling aggrieved, the respondent-company preferred an appeal before the AAC, who had held that the surplus should be treated as income from adventure in the nature of trade. Feeling aggrieved, the Revenue preferred an appeal before the Tribunal. It may be mentioned here that before the Tribunal a plea was taken on behalf of the Revenue that the AAC had erroneously admitted the additional evidence concerning minutes of various meetings of the board of directors of the respondent-company. The Tribunal restored the matter back to the first appellate authority. After remand, the matter was heard by the CIT(A), who called for the remand report from the ITO. The ITO submitted a report giving his opinion that the surplus by way of sale of plant to M/s Amrit Banaspati Co. was (not) an income from an adventure in the nature of trade and, therefore, the benefit of the set off should not be allowed. The CIT(A), however, did not accept the viewpoint expressed by the ITO in his remand report and once again held the surplus as business profits by relying upon the various minutes of the meetings of the board of directors of the respondent-company, which order has been upheld by the Tribunal.
4. We have heard Sri Shambhoo Chopra, learned standing counsel for the Revenue, and Sri S.D. Singh, learned Counsel appearing for the respondent-assessee.
5. Learned Counsel for the Revenue submitted that the respondent company had been showing the margarine plant under the head 'plant and machinery' and as it had not been installed and operated no depreciation was applicable as well as it was capital or fixed asset and the surplus arising on sale of the plant should be assessed as short-term/long-term capital gains and not as profit from adventure in the nature of trade. He further submitted that the minutes have been manipulated to give colour to the transaction and to claim set off against profit/loss for the year in question.
6. Sri S.D. Singh, learned Counsel appearing for the respondent-company, submitted that from the very beginning, the respondent-company had made the purchase of margarine plant for sale and, therefore, it was nothing else but an adventure in the nature of trade. He relied upon a decision of the apex Court in the case of Dalmia Cement Ltd. v. CIT wherein the apex Court has held that it is 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 the trade. However, in such a case the onus of proving that it was a transaction in the nature of trade lies on the Department and further that the transaction is not in the way of business of the assessee does not in any way alter the character of the transaction.
7. Having heard the learned Counsel for the parties, we find that as early as on 6th May, 1969, the board of directors in its meeting had resolved that the margarine plant be installed and shown to the potential buyers with a view to prove that it could be worked satisfactorily and that its working would yield profits to the prospective buyers, which was followed in the subsequent meetings also. The plant was installed sometime in the year 1969, and it could get an offer only in the year 1973. It may be mentioned here that the Tribunal has noted that the ITO has not been able to prove on record although an opportunity was given to him that the said minutes were not genuine and, therefore, the Court is proceeding on the basis that the minutes of the meeting of the board of directors as reproduced in the order of the Tribunal are correct and genuine. The various minutes of the meetings of the board of directors amply prove that the intention from the very beginning was for selling the margarine plant by treating it as one of its business, therefore, it has rightly been treated by the Tribunal to be in the nature of adventure in trade. Further, merely because the respondent had shown it under the head 'plant and machinery' would not make any difference as entry of a transaction in the books of account is not determinative of the true nature of the transaction. As held by the apex Court in the case of Dalmia Cement Ltd. (supra) even an isolated transaction is capable of falling within the definition of 'business'.
8. We are, therefore, of the considered opinion that the Tribunal has not committed any illegality in holding the transaction in question as to be in the nature of adventure in trade. We, accordingly, answer the question referred to us in the affirmative i.e., in favour of the assessee and against the Revenue. However, there shall be no order as to costs.