JUDGMENT This is a reference under section 66(1) of the Indian Income-tax Act by the Income-tax Appellate Tribunal. The following question has been referred to us under section 66(1 : -
"Whether on the findings of fact recorded in the Tribunals order, the sum of Rs. 12,417 is income, profits and gains arising out of carrying on trade or adventure in the nature of trade within the meaning of section 2(4) of the Indian Income-tax ?"
The assessee firm deals on wholesale basis in cloth and prints manufactured by Atherton West Mills Co. Ltd. and J. K. Cotton Spinning and Weaving Mills Co. Ltd. On the 17th 1942, the assessee firm purchased 200 bales of cotton from Harkishan Bishan Dayal and in February, 1943, the bales were sold in one lot and a profit of Rs. 12,417 was made. The question was whether the purchase and sale of the 200 bales of cotton yarn was an adventure in the nature of trade. The Tribunal came to a conclusion against the assessee and, on an application by the assessee, the question mentioned above has been referred to us.
The Tribunal has rightly pointed out that the appellant is a cloth merchant, that the kind of commodity which the appellant bought is not ordinarily bought by investors for the purpose of investment, that the only intention in making the purchase must have been to make a profit in a favorable market, that the goods were sold when the cotton market was going up after about nine months, that the appellant is a businessman and that the money was taken from the funds of the business and after the sale of the yarn it was re-credited in the business. On these considerations the Tribunal was of the opinion that it was an adventure in the nature of trade and the amount was rightly included in the taxable income.
We fully agree with the conclusion arrived at by the Tribunal and hold that, on the findings of fact recorded by it, the sum of Rs. 12,417 was income, profits and gains arising out of carrying on an adventure in the nature of trade within the meaning of Section 2(4) of the Indian Income-tax Act. The assessee is liable to pay the costs of these proceedings which are assessed at Rs. 200.
Reference answered accordingly.