Judgement

RAMASWAMI, J.: In this case the appellant (hereinafter called the assessee) was assessed for the assessment year 1956-57 on a total income of Rs. 8,400. The Income-tax Officer later on came to know that the assessee s income from the sale of estates had escaped assessment. The Income-tax Officer took action under Section 34. (1) (a) of the Income-tax Act, 1922 (hereinafter called the Act) for the assessment year 1956-57 on 13th August, 1959.

2. Under an agreement dated 18th May, 1955, a company called Mundakayam Valley Rubber Co. Ltd., sold and delivered an estate called Kuttikal Estate to one Mr. K. V. George. The area of the estate was 477 acres and 71 cents.Mr. A. V. George had entered into the agreement in his own name and on behalf of another company called the Kailas Rubber Co. Ltd. It was agreed that the vendor would execute the necessary conveyance in favour of Mr. A. V. George or his nominees. On 15th August, 1955, the assessee entered into an agreement with Mr. A. V. George whereby the assessee agreed to purchase 477:71 acres forming part of Kuttikal Estate for Rs. 6 lakhs. An advance of Rs. 11,000 was paid by the assessee. The balance of Rs. 5,89,000 was to be paid by the assessee on or before 25th September, 1955. It was agreed that Mr. A. V. George should execute a sale-deed himself or cause it to be executed by Kailas Rubber Co. Ltd. on whose behalf he was acting in favour of the assessee or his nominees. The assessee subsequently divided the area of 477:71 acres into 23 plots and found purchasers for 22 of these plots. The total extent of 22 plots for which be found purchasers was 373:58 acres, and the total price paid by the 22 purchasers was Rs. 5,18,500. A sale-deed was executed by the Mundakayam Valley Rubber Co., Ltd., on 31st March, 1956. It covered all the 23 plots. The 22 plots for which the assessee found purchasers were conveyed to the respective purchasers and the 23rd plot was convey to the assessee himself. Mr. A. V. George and the Kailas Rubber Co. Ltd., were parties to this document. The plot which the assessee had retained for himself was 104: 13 acres in extent. Its value was estimated by the Income-tax Officer at Rs. 2,08,000. The Income-tax Officer worked out the profit from the transaction of purchase and sale of land as follows:

"Sale price of 373 acres Rs. 5,18,500

Value of 104 acres retained by the assessee at Rs. 2,000 per acre Rs. 2,08,000

Rs. 7,26,500

Less Count Rs. 6,00,000

Rs. 1,26,500

The Income-tax Officer held that a sum of Rs. 1,25,000 in round figures represented the assessee s profit from an adventure in the nature of trade and included this amount in his total income under Section 34 (1) (a) of the Act. The assessee appealed to the Appellate Assistant Commissioner who rejected the appeal. The assessee took the matter in further appeal to the Appellate Tribunal which also rejected the appeal holding that the amount of Rs. 1,25,000 represented profit from an adventure in the nature of trade. At the instance of the assessee the Appellate Tribunal stated a case to the High Court on the following question of law:

"Whether on the facts and in the circumstances of the case, the transactions constituted a venture in the nature of trade and the surplus of Rs. 1,25,000 was assessable to tax?"

By its judgment dated 10th October, 1966, the High Court of Kerala answered the question in the affirmative and against the assessee. This appeal is brought by special leave from the judgment of the High Court of Kerala dated 10th October, 1966 in Income-tax Reference No. 18 of 1965.

3. The question whether a transaction is an adventure in the nature of trade must be decided on a consideration of all the relevant facts and circumstances which are proved in the particular case. The answer to the question does not depend upon the application of any abstract rule or principle or formula but must depend upon the total impression and effect of all the relevant facts and circumstances established in