Income Or Capital

Profits from purchase and sale of shares­ Whether profits from business or accretion to capital-Tests ­Finding of Tribunal-Jurisdiction of High Court to interfere ­Finding that assessee was not a dealer in fires in one year ­Effect-Income-tax proceedings-Rule of res judicata.

Trees of spontaneous growth standing for a number of years-Sale with roots-Sale proceeds whether income or capital. On the grass lands of the area of 10 square miles belonging to the assessee, stood for many years a large number of trees which had grown spontaneously. In the accounting year 1948-49 he sold all these trees by four auctions with a condition that the trees were to be removed with their roots. The purchase price was payable in a lump sum, but was realised by instalments over a period of time so as to suit the convenience of the purchasers. In the accounting years relevant to the assessment years 1951-52, 1952-53 and 1953-54 the assessee realised the sums of Rs. 53,450, Rs. 34,176 and Rs. 7,475 towards the sale proceeds. The Appellate Tribunal held that the amounts so realised by the assessee were merely capital receipts:

Property taken in satisfaction of decree against debtor-Expenditure incurred for improvement and income from property not taken to business account-Sale after 15 years-Profit whether income. The assessee, who was an agriculturist and who was also carrying on money-lending business, in satisfaction of a decree obtained against a debtor for the amount due from him, took in 1934 apiece of land belonging to the debtor. As soon as the property was purchased, the account of the judgment-debtor was closed and a sum of Rs. 4,690 representing the purchase price was debited in the assessee's personal account. The income from the land was blended with income from his other agricultural income, though it was entered in the same set of books wherein money-lending transactions also were entered, as the assessee had only one set of books for all his activities. The expenditure incurred for the improvement of this land was never brought into the business account and no part of the income from this property was utilised for the business. Fifteen years thereafter the assessee sold the land in 1949 at a profit and utilised the sale proceeds for increasing the capital of the money-lending business. The question was whether the profit was income liable to tax: