JUDGMENT
Mrs. Sujata V. Manohar, J.
1. This is a reference under section 256(1) of the Income-tax Act, 1961. The following question has been referred to us for determination :
“Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the transaction of purchase on April 3, 1980, and sale on October 1, 1980, of the National Gold Bonds, 1980, which was effectively held by the assessee only for a period of two days from September 29, 1980, to October 1, 1980, was entered into with the intention of making profit and that such profit earned on the sale of National Gold Bonds, 1980, would be assessable as business income in the hands of the assessee ?”
2. In our view, the question as framed does not bring out correctly the point at issue which we are required to determine. It is also framed in a manner which begs the question. With the consent of the parties, there fore, we have reframed the question as follows :
“Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the transaction of purchase and sale of the National Defence Gold Bonds, 1980, amounted to an adventure in the nature of trade and the resulting profit was taxable as business income in the hands of the assessee ?”
3. The assessee purchased National Defence Gold Bonds, 1980, on April 3, 1980, at the price of Rs. 1,125 per bond. He purchased bonds worth 1,000 grams of gold. The actual payment of the purchase price was made by him by cheque on September 29, 1980. Under the National Defence Gold Bonds, 1980, Scheme, the bonds were to be exchanged by the holder for gold on October 27, 1980. The assessee, however, sold these bonds in one lot on October 1, 1980. He made a profit of Rs. 33,500.
4. In a note attached to his return of income for the assessment year 1981-82, the assessee declared this profit resulting from the purchase and sale of National Defence Gold-Bonds of 1980, amounting to Rs. 33,500 as a capital gain exempt from tax on te ground that under section 2(14)(iv) of the Income-tax Act, 1961, the National Defence Gold Bonds, 1980, are excluded from the definitiion of “Capital assets”. Hence, no capital gains tax is payable in respect of the profit arising form the trasaction. The Income-tax Officer, however, brought the amount of Rs. 33,500 to tax as income from an adventure in the nature of trade. This finding was upheld by the Appellate Assistant Commissioner andthe Tribunal. Hence, the present reference.
5. Whether a solitary transaction of purchase and sale such as this, can be considered as an adven ture in the nature of trade is a mixed question of facts and law. In a number of cases, this question has come up for consideration before the Supreme Court and other High Courts. The Supreme Court, in the case of G. Venkatasswami Naidu and Co., v. CIT [1989] 35 ITR 594, laid down certain tests for determining whether any given transation can be looked upon as an adventure in the nature of trade. It said (headnote) :
“In deciding teh charcter of such transactions several factors are relevant, such as e.g., whether the purcfhaser was a trader and the purchase of the commodity and its resale were allied to his usual trade or business opr incidental to it; the nature and qauantity of teh commodity purchased and resold; any act subsequent to the purchase to improve the quality of the commodity puchased and thereby make it more readily resaleable; any act prior to the puchase showing a design or purpose; the incidents associated with teh purchase and resale, the similarity of the transaction to operations usually associated with trade or business : the repetition of the transaction; the element of pride of possession”.
6. The Supreme Court also said that, in a given case, even an isolated transaction can satisfy the description of an adventure in the nature of trade provided at least some of the essential features of trade are present in teh isolated or single transaction.
7. The Supreme Court, in the case of Saroj Kumar Mazumdar v. CIT , observed that where a transaction was not in the line of business of the assessee but was an isolated or single instance of a transaction, the onus was on the Department to prove that the transaction was an adventure in the nature of trade.
8. In the present case, the assessee’s income consists of salary, guarantee commission and the like. In the return of income for the assessment year 1981-82, the assessee has shown his income from salary as Rs. 54,200, interest Rs. 184 and he has shown business income in the from of (1) guarantee commission of Rs. 22,951 and (2) interest from Soorajmull Nagarmull at Rs. 12,000. There is no other business income. The transaction of purchasing National Defence Gold Bonds, 1980, and selling them after a few months is a solitary transaction. It is, therfore, for the Department to establish that this transaction wa an adventure in the ntaure of trade. According to Mr. Jetley, the fact that actual payment for the purchase was made on September 29, 1980, and the sale took place on October 1, 1980, would indicate that the sole motive for purchasing these gold bonds was to make a profit by sellign them. This argument ignores the fact that the bonds were purchased only in October, 1980. There was, therefore, no question of any quick profit.
9. There does not apear to be any material which would establish that the only motivce of the assessee in purchasing these bonds was to make a profit by selling them at a later date. The assessee had not purchased bonds in very large quantities thereby indicating a desire to trade in them; nor is there any material to show that he had no intention of retaining the bonds and and exchanging them for gold on the due date, October 27, 1980, as he could have done. The assessee had the means to pay for these bonds and in fact he did pay for them. The mere fact that he sold them on October 1, 1980, is not sufficient for the purpose of coming to a conclusion that this was an adventure in the nature of trade. There is also no material to show that the assessee was carrying on any business similar to that of buying and dselling bonds such as d ealing in stock or shares; or that the resale of bonds was allied to the assessee’s usual trade or business or was incidental to it. In these circumstances, in our view, the Department has not discharged the burden of establishing that this was an adventure in the nature of trade.
10. Mr. Dastur, learned counsel for the assessee, has also drawn our attention to ka decision of the Supreme Court in the case of Janki Ram Bahadur Ram v. CIV [1965] 57 ITR 21, where the purchase by the assesseee of a jute factory and its resale within six kmonths were, in the circumstances of that case, hel d by the Supreme Court not to be a business venture. In the pre sent case, the burden of establishing that the solitary transaction was an adventure in the nature of trade was on the Department. It has not discharged that burden. We, therefore, n eed not go into the cases which are referred to by the Supreme Court in the two decisionited earlier. These cases do indicate, however, kthat the transaction must have some trappings of a bu siness nature before it can be considered kas an adventure inthe nature of trade, such as bulk purchase, advertising for its sale, similar other profitable ventures, no likelihood of r etaining the purchased item for one’s own use, etc. In the present case, none of these features have been established by the Department.
11. In the circumstances, the question as reframed is answered in the negative and in favour of the assessee.
12. There will be no order as to costs.