JUDGMENT

Judgment delivered by Ong Hock Sim FJ:

1. The appellant tax-payer bought on October 7, 1964, 6,666 acres (the Kinabatangan property) in Sandakan for $320,000. The price was at the very cheap one of about $50 an acre. The tax-payer was a man of many parts. Among his many roles, he was a cattle farmer as well as an extractor of timber. He said he bought the land for cattle rearing. He had another cattle farm somewhere which was subject to cattle thefts and he intended to transfer his cattle or some of them to this new property. He did nothing of that sort, because he found out that over 5,000 acres were subject to flooding and therefore unsuitable for cattle rearing. But this he found out more than a year after his purchase. However, on March 15, 1966 he secured a timber licence to work this property as a timber land. He however caused it to be cancelled on October 26, 1966. There were no records of his ever having extracted any timber. On October 25, 1966, i.e. a day previous, he sold the property for $580,000 to CYK. $380,000 was paid on the same day. The balance of $200,000 was guaranteed by two persons, namely TKT and LTN, by a cheque drawn by KH Co. Ltd. On the same day, CYK sold the land to KH Co. Ltd. for $595,000. Thereafter KH Co. Ltd. worked the land as a timber concession with the necessary licence and from 1967 to 1971 extracted a total of 1,573,400 cubic feet, mainly from the areas that were not subject to flooding.

2. The Special Commissioners disbelieved the sale of the property to CYK. They did so because there was an admission that the cheque of $200,000 used by CYK to pay the balance of the purchase price was the one issued by KH Co. Ltd. who was the eventual purchaser of the commercial timber on the property.

3. Revenue determined that the appellant had made a profit of $176,774 from the transaction and charged the tax-payer to tax on this sum as income derived from trading in timber. The tax-payer appealed to the Special Commissioners and the High Court on the ground that this sum represented capital appreciation and not income and was therefore not chargeable to tax.

4. Learned counsel for the appellant did not seriously contend against the findings of fact by the Special Commissioners but contended that these facts established clearly a case of capital appreciation. But on the evidence the tax-payer was more a timber man than he was of any of his other occupations. From his own accounts for the years 1964 to 1966, 90% of his income was derived from timber operations. Whatever his stated reasons for the purchase of the property might be, there was no evidence that he carried out in any way his projected cattle rearing on the property. From the figures supplied by KH Co. Ltd., there could be no doubt of the suitability of the property as a logging concession. There was also some timber in the parts subject to flooding. The tax-payer had applied for and obtained a timber licence. His surrender of it was in confirmity with the law, since under the Forest Ordinanace 1954 and the Forest Rules 1954, such a licence was not transferable and the only way KH Co. Ltd could work the land for its timber would be to apply for a licence in its own name and it could only do that after the tax-payer had surrendered his licence. On the evidence it was a possible conclusion that the sale to CYK was a colourable device and that the sale was one to a logging firm. There was ample evidence before the Special Commissioners to come to the finding that the difference in the consideration was not a capital appreciation but a profit arising from the taxpayer's trade and therefore chargeable to tax. The learned Judge also accepted this and it will be wrong for this Court to come to any other conclusion.

5. The last question concerned the sum of $23,703 made up of $11,600 commission, $500 legal fees and $11,603 transfer fees. Because of the intervention of CYK, the Special Commissioners were not satisfied that the sum was wholly and