Commissioner Of Income Tax V. De Zoysa

1956 Present: Basnayake, C.J., and K. D. de Silva, J.

COMMISSIONER OF INCOME TAX, Appellant, and 0. S. DE ZOYSA
Respondent

S. C. 175-Income Tax Case No. 53/2260 /BRA. 236

IN THE MATTER OF A CASE STATED UNDER SECTION 74 OF THE INCOME
TAX ORDINANCE (CAP. 188)

Income Tax Ordinance (cap. 188)-" Trade "-Business "-Requirerment of repetition of activity Sectoin 2, 6 (1) (a),6'(1 )(h)
.
An isolated transaction does not amount to carrying on or exercising a trade or business within the meaning of section 6 (1) (a) of the Income Tax Ordinance so as to render the profits of the transaction liable to taxation.

A land owned by the assessee's wife was requisitioned during the war, and the Admiralty erected ten hangars thereon. After the war, availing himself of the concession granted by the Admiralty to owners of requisitioned land of purchasing the buildings erected thereon, the assessee bought nine of the hangars and made a profit by re-selling them.

Held, that the purchase and re-sale of the hangars did not come within the expression " trade " or " business " in section 6 (1) {a} of the Income Tax Ordinance. The sum, therefore, earned by the assessee was not liable to tax as being profits within the meaning of section 6 (1) (a).

CASE stated under Section 74 of the Income Tax Ordinance

M. Tiruehelvam, Deputy Solicitor-General, with A. Mahetidrarajah, Grown Counsel; and H.L. de Silva, Crown Counsel, for Appellant.

No appearance for Respondent.

Cur. adv. vult

May 29, 1956. BASNAYAKE, C.J-

The assessee's wife owned a four-acre block of land at Boosa and also undivided shares in other surrounding lands. These lands had been requisitioned during the war and the Admiralty had erected 10 hangars and some buildings thereon. By the end of 1947 it became known that the Admiralty was about to move out of the land. As the policy of the Admiralty was to give the owners of land on which it had erected buildings the option of purchasing them, the assessee- approached the Senior Surveyor of Lands with a view to buying the hangars. He obtained the permission of the other co-owners of the lands surrounding the four-acre block to negotiate on their behalf with the Admiralty for the purchase

of the hangars, and he also paid them certain sums of money for the surrender of their option to purchase and the right to damage compensation. His negotiations with the Senior Surveyor were conducted through one H. W. Gunatilleke of H. W. Gunatilleke & Company Limited, whose business was the purchase and sale of surplus war materials and supplies.

After the assessee had commenced negotiations with the Admiralty, the Ceylon Government acquired the land for the use of the Railway. Thereafter the assessee continued negotiations with the Railway and agreed to purchase 9 of the hangars at Rs. 90,000. The tenth was sold to a third party later. The assessee himself had no money to purchase the hangars, and H. W. Gunatilleke agreed to arrange the finance on -condition that he received one-third share of the net profits. As hangars were in great demand in India, Gunatilleke advertised in the Indian papers and visited India along with the assessee. Many offers were received from India but no sale was concluded as the highest tenderer withdrew his offer after inspection. Ultimately Gunatilleke found a Ceylonese purchaser, one T. B. Beddewela, who agreed to buy the 9 hangars for Rs. 288,000. An advance of Rs. 5,000 was paid and he undertook to pay the balance in instalments but failed to do so. Unable to find the money Gunatilleke gave up the quest retaining for himself the sum of Rs. 5,000 which Beddewela had paid him as an advance. As the Railway was pressing the assessee for payment, he sought the aid of his father, from whom he obtained Rs. 45,000, and the balance Rs. 45,000 he obtained from Senator Cyril de Zoysa. He paid the Railway the full sum of Rs. 90,000 on 15th June 19

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