The activities carried on by the assessee, a Hindu undivided family, of acquiring, maintaining, and training race horses and employing them in races conducted in different centers constituted a "business" within the meaning of section 2(13) of the Income Tax Act, 1961.

ABDUL HADI, J.

In this tax case by the Revenue under section 256(1) of the Income-tax Act, 1961, the questions of law referred to us are as follows:

"1. Whether, on the facts and in the circumstances of the case, the assessee could be stated to be carrying on a business in racing ?

2. Whether, on the facts and in the circumstances of the case, the assessee was entitled to a deduction of a sum of Rs. 60, 779 from the total income for the assessment year 1972-73 ?"

In other words, the real question that has to be considered is whether the activities carried on by the respondent/assessee (Hindu undivided family) would constitute a "business" as defined under section 2(13) of the Income-tax Act, 1961. Even according to learned counsel for the Revenue, the activities carried on by the assessee consist of acquiring race horses, maintaining and training them and employing them in different races conducted in different centres, after taking necessary assistance from other persons for running the said horses in the races and after paying requisite fees to the race clubs, which conduct the races and invite betting from the members of the public. Further, according to him, when the assessee's horse or horses win in the races, the assessee would get prize money, which would be a substantial one, and when the assessee's horses do not win, the assessee would not get such prize money, and for the various expenditures incurred by it for maintaining and training horses and making them run in the races there may not be any return.

In the present case, two such horses of the assessee became useless and, hence, deduction of Rs. 18, 750 under section 36(1)(vi) has been claimed. That apart, general loss is also claimed, with reference to the abovesaid activities, to the extent of Rs. 42, 029. The total loss thus claimed is Rs. 18750 + Rs. 42, 029, namely, Rs. 60, 779. The abovesaid deduction of Rs. 18, 750 could be claimed under the Income-tax Act, 1961, only if the assessee's income or loss comes under the head "Profits and gains of business or profession". Likewise, with reference to the abovesaid loss of Rs. 42, 029 according to counsel, carry forward could be claimed under the said Act only if it comes under the said head. So, the assessee claimed that his activities constitute "business". On the other hand, the contention of the Revenue is that they do not constitute "business" and the income or loss of the assessee would only fall under the head "Income from other sources" The case before us is with reference to the assessment year 1972-73. Admittedly, for all the six or seven earlier assessment years, similar activities of the assessee have been treated by the Department itself only as "business" and his income or loss was assessed only under "Profits and gains of business or profession".

In the assessment year 1972-73, though originally the Income-tax Officer has held that the assessee's activities could not be treated as "business", the first appellate authority and, subsequently, the Tribunal have held that the said activities would constitute "business" and that, hence, the assessee's claim should be accepted.

Learned counsel for the Revenue also relied on the decisions of (i) Lala Indra Sen (ii) Janab A. Syed Jalal Sahib v. CIT and (iii) CIT v. S. S. Thiagarajan in support of his contention.

The respondent remains unrepresented.

It is clear to us that the abovesaid decisions, cited by learned counsel for the Revenue, would not support his contention. Before referring to those decisions, we shall first refer to the definition of the term "business" under section 2(13) of the Act. It runs thus:

"' business ' includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture."

Thus, the Act defines the term "business" only inclusively. We also find similar definition under section 2(d) of the Tamil Nadu General Sales Tax Act prior to the amendment made in 1964, which runs as follows:

"'