Mahawithana V. Commissioner Of Inland Revenue

1962 Present: H. N. G. Fernando, J., and Herat, J.

D. S. MAHAWITHANA, Appellant, and COMMISSIONER OF INLAND REVENUE, Respondent

S. C. 1 of 1962-Income Tax Case, Stated BRA/229

    Income tax-" Adventure in the nature of trade "-Taxability of profits therefrom- Case stated-Scope and nature of power of Supreme Court to interfere on questions of fact-Income Tax Ordinance, ss. 6 (1) (a), 78.

    The assessee-appellant purchased a tea estate for the purpose of selling it in parts for a profit.

    Held that the transaction was an adventure in the nature of trade and, therefore, the profit made from it was taxable under section 6 (1) (a) of the Income Tax Ordinance.

    Held further, that, in a case stated under section 78 of the Income Tax Ordinance, the Supreme Court could consider the correctness of the inference drawn by the Board of Review as to the assessee's intention, only (a) if that inference had been drawn on a consideration of inadmissible evidence, or after excluding admissible and relevant evidence, (6) if the inference was a conclusion of fact drawn by the Board but unsupported by legal evidence, or c) if the conclusion drawn from relevant facts was not rationally possible, and was perverse and should therefore be set aside.

    CASE stated under the Income Tax Ordinance.

    H. V. Perera, Q. C., with S. Ambalavanar and D. E. V. Dissanayake, for the assessee-appellant.

    A. C. Alles, Deputy Solicitor-General, with E. D. Wikramanayake, Crown Counsel, for the respondent.

Cur. adv. vult.

June 28, 1962. H. N. G. FERNANDO, J.-

    In this Case Stated under the Income Tax Ordinance the Board of Review in paragraph 29 of the case states " the assessee by his communication on 31.8.1961 ..... applied to the Board to have a case stated for the opinion of the Honourable the Supreme Court on the questions of law arising in this case and this case is stated accordingly ". The communication mentioned does not satisfactorily set out the questions upon which the opinion of the court is sought and parts of it merely contain certain submissions as to the manner in which the Board of Review considered the Association's appeal. Having regard to certain observations in an Indian judgment which will be referred to later, the proper form of the question of law arising for our consideration is whether " on the facts and circumstances proved in the case, the inference that the transaction

in question was an adventure or concern in the nature of trade is in law justified ". In view of the various considerations which become relevant, I think it useful to set out seriatim various transactions in which the assessee was proved to have been concerned :-

    (1) The assessee was the owner of the Tismode Tea Factory where he manufactured tea from " bought leaf " but he did not own any land cultivated with tea.

    (2) On 1.10.1954 the assessee made an offer to the proprietors of Belwood Estate for the purchase of the estate of 583 acres for the sum of Rs. 1,300,000 and forwarded a cheque for Rs. 130,000 as a deposit of 10% of the purchase price. On 11.10.1954 the offer was increased to Rs. 1,335,000 and a further deposit of Rs. 3,500 was made.

    It would appear that one Mr. Wijesinghe assisted the assessee financially to make the deposit, and was in addition himself interested in the same way as the assessee, though perhaps not to the same extent, in the success of transactions in contemplation when these offers were made.

    (3) Belwood Estate consisted of fields numbered 1 to 12 and of another lot described as lot 112. The assessee's offer was accepted and on 25.11.1954 he entered into a notarial agreement to purchase the estate before 1st January 1955. the agreement providing that the deposit of Rs. 133,500 would be forfeited if the transaction was not completed before the due date.

    (4) On 4th December 1954, the assessee and

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