Mohamed Azmi J:

This is an appeal by way of Case Stated against the decision of the Special Commissioners of Income Tax that the sum of $298,837 being the difference between the purchase price and cost paid by the appellants of approximately 93.8 acres of rubber land and the sum awarded by the Collector of Land Revenue, Klang, under the Land Acquisition Act, was chargeable to tax under s. 4(a) of the Income Tax Act, 1967. The appellant company, which was registered on 19 March 1965, purchased the land by agreement in September the same year for a sum of $1,104,832 exclusive of costs. The Collector's award was made on 12 March 1968 and compensation in the sum of $1,407,139.69 was paid to the appellant company as market value of the land at the relevant date of acquisition. The tax assessed on the difference amounted to $134,376.65.

The brief facts of the case as found by the Special Commissioners are as follows. By agreement dated 20 October 1964, Y K N and four others purchased the land in question from Seaport (Selangor) Rubber Estate Ltd for the sum of $1,207,500. The land was purchased with the sole object of transferring same to the appellant company yet to be formed, for purposes of conducting a housing development. It formed a natural extension to an existing housing estate known as University Gardens; and, as such it had potentiality as building land. In line with their original objective, Y K N and his four colleagues incorporated and registered the appellant company on 16 March 1965 with an authorised capital of $5,000,000 divided into 500 shares of $10,000 each, with power from time to time to increase or reduce its capital. They became the five subscribers to the Memorandum and Articles of Association of the appellant company, and they were also the first directors. The objects for which the appellant company was established are as set out in cl 3 of the Memorandum of Association. (See exh. A9). On 12 June 1965, the Commissioner for Lands Selangor notified in the Selangor Government Gazette that the property was likely to be needed as a site for lowcost housing. (See exh. A2 p. 16). In spite of the said notice - which, according to the admission of Y K N at the hearing before the Special Commissioners, was known to him and his four colleagues - an agreement was entered into on 18 September 1965 whereby the land in question was transferred by assignment to the appellant company. Upon the said transfer, the appellant company took various steps in 1966 to develop the said land by submitting a draft layout plan and applying for sub-division. These steps were taken despite the fact that the directors of the appellant company were well aware of the fact that a declaration of intended acquisition of the land under s. 8 of the Land Acquisition Act, 1960 had been published in the Government of Selangor Gazette on 23 December 1965. (See exh. A2 p. 17). The explanation given by the appellant company for their action was that they were hoping that the Government might decide not to acquire the property. As stated earlier on, the appellant company was eventually awarded a sum of $1,407,139.69 by the Collector as compensation. At an extraordinary meeting of the appellant company held on 5 November 1969, it was resolved that the company be wound up.

Although Mr. Woodhull had submitted on behalf of the appellants that there are four grounds of appeal, it is not in dispute that the only question for determination in this case is whether the sum of $298,837 being the difference between the Collector's award and the purchase price and costs is assessable to income tax under s. 4(a) of the Income Tax Act, 1967. This subsection provides:

Subject to this Act,. the income upon which tax is chargeable under this Act is income in respect of -

(a) gains or profits from a business, for whatever period of time carried on.

It is therefore clear that for the above sum to be chargeable to tax, it must be the appellant company's inco