High Court Of Rajasthan
CIT vs. Moti Chand Khajanchi
Sections 10(3), 2(13)
Asst. Year 1964-65
J.S.Verma, C.J. & Milap Chandra, J.
D.B.IT Ref. No.10 of 1976
27th August, 1987
Counsel Appeared
B.R. Arora, for the Revenue : R. Bolia, for the Assessee
MILAP CHANDRA, J.:
This is a reference under s. 256(1) of the IT Act, 1961 (hereinafter to be called ” the Act”), made by the Tribunal, Jaipur Bench, Jaipur, on the request of the CIT, Rajasthan, Jaipur, to answer the following question, namely:
” Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the assessee was neither carrying on any business in the purchase and sale of paintings nor was the transaction an adventure in the nature of trade and, therefore, the receipts from the sale of paintings were of a casual and non-recurring nature, not arising from business, profession or vocation ? “
The facts of the case giving rise to the reference may be summarised thus., The assessee, Sri Moti Chand Khajanchi, derived income from interest, dividends and shares from three partnership firms, besides income from property. For the asst. yr. 1964-65, he filed a return showing an income of Rs. 23,416 from these sources. He gave a note in the return that the receipt of Rs. 3 lakhs from the sale of paintings was not liable to tax as it was neither a business profit nor a capital gain. The ITO called upon him to show cause as to why the profit on the sale of paintings be not added to his income. In reply, he contended that he was not a dealer in old paintings, the collections had been made as a hobby and not for business considerations, the sales were effected not with the motive of making profit but to serve the national interest of the country, the articles were his personal effects, and, therefore, they were not a capital asset for the purpose of assessment as capital gains. The ITO rejected his contentions and observed that the magnitude of the purchases, the recurrence of the transactions, the transactions having been made outside the books and the profit motive having been evidenced from these transactions, clearly suggested that the hobby had grown into a trade and accordingly held that the transaction was in the nature of trade and taxed the difference as business profit. Being aggrieved by the order of the ITO, the assessee filed an appeal before the AAC who agreed with the findings of the ITO and dismissed the appeal. Thereafter, the assessee filed a second appeal before the Tribunal. It held that the assessee was not carrying on any business in the purchase and sale of paintings, the transactions in question were not adventures in the nature of trade, the collection of paintings and curios was for the satisfaction of his hobby and the receipts from the sales of paintings were of a casual and nonrecurring nature, not arising from business, profession or vocation. Accordingly, the appeal was allowed. The learned Commissioner moved the Tribunal under s. 256(1) of the Act for making the reference. Hence this reference. During the pendency of the reference, Sri Moti Chand Khajanchi died on March 14, 1979, and his aforesaid legal representatives were brought on record .
It has been contended by learned standing counsel for the Department that it could hardly be accepted that regular and huge purchases of old paintings and curios made by the assessee from time to time were only just to satisfy his hobby without any motive to make profit. He started making purchases of the articles when their prices had fallen on account of their export having been banned by the Government of India. They were being sold in large quantities at nominal prices by the rulers of smaller States and jagirdars after the integration of the States. The assessee was tempted to purchase them because of their availability at low prices and not because of his hobby.
The purchases were not only made against cash but also were made against shares of Bikaner Gypsum Ltd. The paintings so purchased were exhibited to attract the public and if national interest was paramount in the mind of the assessee, he could have loaned or donated the paintings to the National Museum, New Delhi, and would not have demanded Rs. 6 lakhs as their price through his letter dated March 2, 1970. He further contended that the facts and circumstances of the case as mentioned in the orders of the assessing authority and of the learned AAC clearly go to show that the intention of the assessee in purchasing these articles was in the nature of business and not as a hobby. He lastly contended that, initially, it was a hobby but, later on, it grew into a concern in the nature of trade.
4. In reply, learned counsel for the asseseee contended thus. The assessee, late Shri Moti Chand Khajanchi, was pursuing the hobby of collecting paintings and other art objects since 1940 when he was a minor. His collections were held in high esteem by various authors, curators and lovers of art. The bulletin of the Prince of Wales Museum of Western India, 1953-54 and Kanha Dade Prabandh of Padmanabha written by Shri K. B. Vyas and published under the orders of the Government of Rajasthan have references to his paintings. He has been described as an enlightened connoisseur in the foreword to the catalogue of his miniature paintings published by the Lalit Kala Academy. His name was suggested for the membership of the Regional Art Advisory Committee formed by the Government of Rajasthan. He loaned his paintings and art objects for exhibition in the year 1954 to G. G. S. J. Museum, Bikaner, under the caption of Khajanchi Art Gallery and were taken back in the year 1962. Exhibitions of his paintings were held by the Lalit Kala Academy at various places. He donated 8,000 manuscripts to the Government of Rajasthan in the year 1962. All purchases of paintings and art objects were personally made by him and they did not find mention in the account books maintained by him in respect of his business. No record of their purchases was maintained. Besides the sale in dispute, only two more sales were made. Firstly, it was made to Vidyapeeth, Sangaria, on the great insistence of Swami Keshavanandji for Rs. 4,000 in the year 1949-50. Their price was received in three instalments. Secondly, sale was made to Bharat Kala Bhawan, Varanasi, for Rs. 34,000 on the great persuasion of its Director, Sri Kishandas Padma Bhushan. In the asst. yr. 1955-56, the ITO made an addition of Rs. 10,000 on the sale of the curios. On appeal, it was set aside by the AAC, vide his order dated December 19, 1958. During the course of assessment proceedings for the asst. yr. 1960-61, the WTO made enquiries from the assessee as to why the value of the paintings and curios was not disclosed in the wealth-tax return. The assessee filed a reply and an affidavit stating the above facts and it was accepted. In the asst. yrs. 1962-63 and 1963-64, the value of these paintings and curios was also not included. The Commercial Tax Officer, Jodhpur, also issued notice requiring the assessee to show cause as to why he should not be registered under the Rajasthan Sales Tax Act and the sales effected by him to the National Museum and Bharat Kala Bhavan be not taxed. No further action was taken by the Commercial Tax Officer after perusing his reply. The paintings were sold to the National Museum, New Delhi, in the national interest on the great persuasion of Shri Ramkishan Dass and the amount of Rs. 3 lakhs offered by it was simply taken. In his letter dated May 16, 1959, addressed To the joint Education Advisory, New Delhi, the assessee expressed his apprehension that he might not be harassed by the IT authorities and requested for moving the Finance Ministry. The .Ministry of Scientific Research and Cultural Affairs, New Delhi, informed him that he was not a dealer in the art objects and paintings, the transaction did not amount to an adventure in nature of the trade and the sale amount paid by the Government would not be treated as business receipt by its letter dated July 18, 1959. The assessee never had any intention to trade in the paintings and curios. They were purchased for entertaining himself and as a hobby. His statements were recorded from time to time by various ITOs and every time he disclosed the said facts. The burden lay upon the Department to establish that the disputed sale amounted to an adventure in the nature of trade and the Department has failed to discharge its initial burden.
5. It is clearly stated in paras. No. 24, 25 and 26 of the statement of the case as under: ” From the facts and the material available on record, it is clear that the assessee has collected old paintings, curios, etc., since the year 1940 when he was a boy of 16-17 years old. Since 1940, till the assessment year under consideration, only 3 sales to the three institutions, namely, Vidyapeeth, Sangaria (Sri Ganganagar) in 1949-50 for Rs. 4,000, to National Museum, New Delhi, for RE. 3 lakhs in 1963, and to Bharat Kala Bhavan, Varanasi, in 1964 for Rs. 34,000 were made. At that time, it could not be said that there was any profit motive in his mind. In the absence of any other positive evidence on record, it could hardly be said that there was any profit motive in making the collections of the paintings and curios. If the Revenue wanted to add income from the sale of the paintings, etc., it should have brought on record positive evidence to show that the income arose out of a transaction which was an adventure in the nature of trade. The collections of the assessee were held in very high esteem by various curators, authors and lovers of art. There was mention of the assessee’s paintings in the bulletin of Prince of Wales Museum of Western India, 1953-54 and Kanha Dade Prabandh of Padmanabha written by Professor K. B. Vyas and published under the orders of the Government of Rajasthan. He was described as an enlightened connoisseur in the foreword to the catalogue of his miniature paintings published by the Lalit Kala Academy. Eminent people were attracted to see his paintings. His name was also suggested for the membership of the Regional Art Advisory Committee formed in Rajasthan with the object of carrying out a survey and making contact with the owners for persuading them to give or sell art objects by the Chief Superintendent Archaeology and Museum. The assessee also loaned his paintings and art objects for exhibition in the year 1954 to G. G. S. J. Museum, Bikaner, and they were taken back in the year 1962. Exhibitions of his paintings were held by the Lalit Kala Academy at various places. He donated 8,000 manuscripts to the Government of Rajasthan. The purchases were effected out of withdrawals made by the assessee from his books of account. He made no purchases with borrowings. He did not keep any account of the purchases because he was acquiring them in pursuit of a hobby. The first sale of paintings was made to Vidyapeeth, Sangaria, on the insistence of Swami Keshavanandji for Rs. 4,000 in the year 1949-50. The sale price was received in three instalments. The ITO added Rs. 10,000 to the total income of the assessee on account of the said sale but the order was set aside by the AAC. For the asst. yr. 1960-61, the WTO specifically enquired from the assessee as to why the value of his paintings and curios be not included in the net wealth. He filed his reply and an affidavit and the WTO did not include the value of the paintings and curios in the wealth-tax assessment for the years 1960-61 and 1961-62. The Commercial Tax Officer, Survey & Investigation, Jodhpur, also issued notice to show cause as to why he be not registered and the said sales be not taxed. No action was taken after he filed his reply. On the great persuasion of Shri Rai Krishan Dass, Member, Art Purchase Committee, National Museum, New Delhi, the assessee sold the said paintings to the National Museum, New Delhi, for Rs. 3 lakhs.
The assessee requested the Ministry of Scientific Research and Cultural Affairs that they should first move the Finance Ministry and find out if there would be any income-tax on the sales proposed to be made to the National Museum. He was informed by the Ministry of Scientific Research and Cultural Affairs that if he was not a dealer in the articles, the transaction would not amount to an adventure in the nature of trade and the amount paid by the Government would not be treated as business receipts. Under these circumstances, the assessee sold the paintings for Rs. 3 lakhs to the National Museum, New Delhi, in the interest of the nation.”
6. It is further mentioned in the statement of the case that the Tribunal recorded the following findings (1) The assessee was neither carrying on any business in the purchase and sale of paintings nor could it be said that it was an adventure in the nature of trade. (2) The dominant object of the assessee has been to collect paintings and curios for the satisfaction of his hobby. (3) There is no evidence on record that the assessee had been purchasing and selling paintings and art objects as a trader. (4) The paintings and curios purchased and sold by the assessee were not the subject-matter of trade. (5) During the time the assessee was in possession of the said objects, he had been claiming pride of possession and aesthetic satisfaction. (6) There is no evidence on record which may go to suggest that from the inception, there was any intention on the part of the assessee to trade in this line and the said purchases were made with the intention of earning profit. (7) The Department failed to discharge the burden which lay upon it to prove that the receipt in question was from business, profession or vocation or that it was an adventure in the nature of trade. (8) The said findings of the Tribunal have not been challenged by the Department. It is also not the case of the Department that the Tribunal failed to take into account the relevant material on record in arriving at its finding or acted upon inadmissible evidence or misread the evidence or has based its conclusion on conjectures and surmises. It has been observed in Anil Kumar Roy Chowdhury vs. CIT 1976 CTR (SC) 98 : (1976) 102 ITR 12 (SC) at p. 18 as follows: ” In India Cements Ltd. vs. CIT (1966) 60 ITR 52, this Court again observed that the High Court must accept the findings of fact made by the Tribunal and the correctness of these findings of fact cannot be questioned except by applying under s. 66 expressly raising the question about the validity of the findings. In Rameshwar Prasad Bagla vs. CIT (1973) 87 ITR 421, this Court reiterated the law stated in CIT vs. Calcutta Agency Ltd.(1951) 19 ITR 191 and India Cements Ltd. vs. CIT (1966) 60 ITR 52 (SC) : ‘It is for the Tribunal to decide questions of fact, and the High Court in a reference under s. 66 of the Act cannot go behind the Tribunal’s findings of fact. The High Court can only lay down the law applicable to the facts found by the Tribunal. The High Court and the Supreme Court, in an appeal against the judgment of the High Court given in a reference under s. 66 of the Act, are not constituted Courts of appeal against the order of the Tribunal. These Courts only exercise advisory jurisdiction in such references. The High Court in a reference under s. 66 of the Act can, however, go into the question as to whether the conclusion of the Tribunal on a question of fact is based upon relevant evidence …… The fact that the High Court on appreciation of evidence would have arrived at a conclusion of fact different from that of the Tribunal did not warrant interference with the finding of the Tribunal’. “
As such it is not permissible for the Court in its reference jurisdiction to reappreciate the evidence and interfere with the Tribunal’s findings of facts. Para. No. 27 of the statement of the case starts as under: ” For the reasons stated above, we refer for the opinion of the Hon’ble High Court, the following question of law.” No reason has been mentioned in any of the earlier paragraphs of the statement of the case. The Tribunal has correctly applied the law laid down in G. Venkataswami Naidu & Co. vs. CIT (1959) 35 ITR 594 (SC), Bhogilal H. Patel vs. CIT (1969) 74 ITR 692 (Bom) and Janab Abubucker Sait vs. CIT (1962) 45 ITR 37 (Mad) to the said admitted or proved facts and correctly held that the assessee was neither carrying on any business in the purchase and sale of paintings nor was the disputed transaction an adventure in the nature of trade.
The next question for consideration is whether the receipts from the sale of paintings were of a casual and non- recurring nature. Neither the word ” casual ” nor the word ” non-recurring ” has been defined in the IT Act. As such, they must, therefore, be construed in their plain and ordinary sense. In the Oxford Universal Dictionary, the word ” casual ” is defined as meaning ” (i) subject to or produced by chance; accidental, fortuitous; (ii) coming at uncertain times ; not to be calculated on, unsettled. ” It has been held in Rani Amrit Kunwar vs. CIT (1946) 14 ITR 561 (All) (FB), that the word ” non- recurring ” does not mean that the receipt has not, as a matter of accident or as a matter of fact, recurred, but that there is no claim or right in the recipient to expect its recurrence. The word ” non-recurring ” does not mean that the receipt is a single one or it has in fact not been repeated, but only that there is no claim or right in the recipient to expect its recurrence. On the basis of the said findings of the Tribunal, it can safely be held that the receipts from the sales of paintings were of a casual and nonrecurring nature. As such, the said question deserves to be answered in the affirmative.
In the result, the aforesaid question is answered in the affirmative, in favour of the assessee and against the Department.
[Citation : 171 ITR 280]