D.V. JUNNARKAR, A.M.: ORDER assessee has filed this appeal on various grounds mainly relating to assessability of compensation received from Maharashtra Government in February 1979 in respect of 181 acres of land at Oshiwara near Jogeshwari, compensation received from Bombay Municipal Corporation for piece of land at Parel and balance of sale proceeds received from Oshiwara Land Development Corporation (P) Ltd. in respect of 542 acres of land, as business income. 2. At time of hearing on earlier occasion, i.e., on 28th June, 1984, counsel for assessee had sought leave to take some additional grounds challenging validity of assessment. grounds being purely legal were admitted. There are as many as eight additional grounds. For sake of convenience, we will take up additional grounds first. counsel for assessee has grouped additional grounds into four effective grounds. It is contended that : (i) order of assessment made by ITO under s. 143(3)/144B of IT Act, 1961 ('the Act') is barred by limitation ; (ii) assessment order is invalid as ITO had prepared and forwarded two draft assessment orders, which is against law ; (iii) assessment order is invalid as ITO had completed same without complying with mandatory directions of IAC under s. 144B(4) ; (iv) assessment order is invalid as time taken in proceedings, commencing from date ITO forwarded draft assessment order to assessee and ending with receipt of IAC's directions under s. 144B(4) by him, exceeded 180 days. 3. assessee is company. proceedings relate to its assessment for asst. yr. 1979-80, for which previous year is financial year 1978- 79. Ordinarily, as laid down in s. 153(1)(a)(iii) of Act, assessment could be completed on or before 31st March, 1982. However, provisions of s. 144B were admittedly applicable in this case. ITO had forwarded draft assessment order to assessee on 24th March, 1982 and had received IAC's directions under s. 144B(4) on 25th Sept., 1982. assessment was completed on 27th Sept., 1982. It is pertinent to mention that ITO had prepared another draft assessment order, which he had forwarded to assessee on 27th March, 1982, and had, while completing assessment on 27th Sept., 1982, evidently not done anything in pursuance of IAC's following directions under s. 144B(4) : "3. (vi) next objection is against not allowing deduction in respect of short-term capital loss of Rs. 39,150. In this connection, ITO has mentioned that deduction will be given under s. 154 on production of proper evidence. remark of ITO on this point is not proper. assessee has, however, not furnished details regarding short-term capital loss during s. 144B proceedings. ITO should obtain details of short-term capital loss before completing assessment. He should give categorical judgment for allowing or disallowing loss." 4 . As stated above, counsel for assessee has challenged validity of assessment by raising additional grounds. It is stated that in terms of Expln. 1(iv) to s. 153, time to be excluded from ordinary period of limitation of two years is time taken between two dates, viz., date when ITO forwarded draft assessment order to assessee and date on which he received IAC's directions subject to ceiling of 180 days. Since, according to him, time taken in this regard is more than 180 days, assessment could have been completed on or before 25th Sept., 1982. For this purpose, Shri Ajay Thakore has given us three or four methods of calculation of time by pointing out to fact that assessment is barred by limitation by two to five days. In support, reliance is placed on instruction issued by CBDT being Instruction No. 11 67 (XXIV/1/14-Secs. 144A and 144B of IT act, 1961 and clarification regarding). For purpose of showing that ITO could not have prepared and forwarded more than one draft assessment order and that time exceeding 180 days could not have been taken in these proceedings, counsel has strongly relied on Delhi High Court's decision in case of Sudhir Sareen vs. ITO (1981) 128 ITR 445 (Del). Inviting our attention to draft assessment order, IAC's directions under s. 144B(4) (quoted above) and final assessment order completed on 27th Sept., 1982, Shri Thakore submits that ITO has evidently completed assessment without doing anything in compliance with IAC's directions, perhaps for want of time. This, according to him, has made assessment order invalid. 5. Strong reliance has been placed on order of CIT(A) by Shri Roy Alphonso, senior Departmental Representative on behalf of Revenue. According to him, plain reading of s. 153(1)(a)(iii), along with Expln. 1(iv), makes it clear that there is no time limit laid down in that section or in any other section regarding time to be taken from stage of forwarding draft assessment order to assessee and receipt of IAC's directions under s. 144B(4) by ITO. expression within brackets in Explanation 'not exceeding 180 days' refers to ceiling on maximum time that could be excluded from ordinary time limit for completion of assessment, i.e., two years. According to Departmental Representative, whenever time taken in this regard is more than 180 days, period of 180 days alone is to be excluded from ordinary time limit of two years, which would mean that time limit for completion of assessment in such case would stand extended by 180 days. Board's instruction, relied upon by assessee's counsel, supports his reading of section rather than that of assessee's counsel. If so calculated, last date for completion of assessment in this case was 27th Sept., 1982 and assessment has been completed on that date. Fairly admitting that Delhi High Court has held in its decision in Sudhir Sareen's case (supra) that ITO has to prepare and forward only one draft assessment order, Departmental Representative points out that in this case so-called second draft assessment order is not really draft assessment order. What has happened is that while preparing first draft assessment order, ITO had omitted to mention that penal provisions of s. 273(a) and s. 271(1)(a) of Act are attracted. This has been mentioned as finding in second draft order. In other words, second draft assessment order is in nature of rectification of first draft assessment order. In any case, same, if considered improper, may be ignored. This fact by itself does not make assessment order invalid. As regards allegation that ITO did not comply with directions of IAC, it is submitted that ITO has done it according to his understanding of IAC's directions. In case, it is felt that his understanding of IAC's directions is not correct, he may be directed to do so after giving him clear guidelines. 6. Having heard parties and after carefully going through provisions of s. 144B(4) and sub-s. (1)(a) and Expln. 1 of s. 153, we find that s. 153(1)(a)(iii), which is applicable for year under appeal, provides for time limit of two years from end of assessment year, i.e., 31st March, 1980. This means that assessment for year under appeal could have been completed on or before 31st March, 1982 in normal course. Expln. 1 to s. 1 5 3 further provides that in computing period of limitation, time taken in various proceedings mentioned in various clauses shall be excluded. There is no ceiling for time to be excluded from period of limitation in any clause other than cl. (iv) and this is, according to us, for good reason. In other clauses, time to be excluded is referable to some act of omission or commission wholly or partly to proceedings before agencies over which IT Department has no control such as, Courts, Settlement Commission, auditors. legislature's anxiety has been that ITO, AO should have full period of two years for completing assessments at his disposal. There is ceiling of 180 days for time to be excluded under cl. (iv), because under this clause time is taken not by outside agency but by ITO and IAC, who are officers of IT Department and they cannot be allowed to use this clause to overcome period of limitation by their own default. In other words, if they take more than 180 days in these proceedings, they will be cutting into time of ordinary period of limitation of two years available to AO. If considered in this background, it becomes clear that time to be excluded under Expln. 1(iv), relevant for purpose of this appeal, is actually time taken in these proceedings by ITO and IAC subject to ceiling of 180 days. Thus, time so taken subject to 180 days will be available to ITO for completing assessment over and above ordinary period of limitation of two years. assessment was, therefore, to be completed and has been completed on 27th Sept., 1982 and is, therefore, in time. We have very carefully gone through Board's instruction supra. Other paragraphs of instruction are general. illustration given clearly shows that Board has also understood provisions in same manner in which we have understood. In illustration given, copy of draft assessment order for asst. yr. 1975-76 was forwarded on 10th March, 1978 and directions from IAC were received on 6th Aug., 1978. time taken in these proceedings, thus, amounted to 149 days. Excluding period of 149 days from ordinary period of limitation of two years, last date by which assessment could be completed would be 27th Aug., 1978. Board has calculated period in different manner but result is same. It has taken that ITO having forwarded draft assessment order on 10th March, 1978, period of limitation stopped running on that date. ITO had, thus, with him 21/22 days to complete assessment. time started running again from 6th Aug., 1978, when ITO received IAC's instructions so much so that he could complete assessment on or before 27th Aug., 1978. We fail to understand how Board's instructions support assessee's contention. 7. We are inclined to accept that second draft assessment order is in nature of rectification and is not independent draft assessment order. Delhi High Court's decision in Sudhir Sareen's case (supra) is, thus, not applicable. We must frankly admit that we are unable to find any support from above decision of Delhi High Court for view that if such proceedings take more than 180 days, order of assessment becomes invalid. As regards last contention, we accept submission of assessee's counsel that ITO should have given hearing to assessee and applied his mind to question of allowance or disallowance of assessee's claim for short- term capital loss as per IAC's directions quoted above, which were binding on him in terms of sub-s. (5) of s. 144B. However, this, to our mind, indicates that either his understanding of directions is incorrect or that he was running against time and did not comply with directions. In either event, this lapse on part of ITO does not invalidate assessment. Accordingly, we hold that order of assessment is valid. 8. Coming to main ground on which appeal has been filed before us, facts are that assessee was registered as company under Companies Act, 1956, on 11 th June, 1975. During accounting period, assessee's authorised and paid-up share capital was for amount of Rs. 5,00,000 and Rs. 1,00,200, respectively. entire share capital was subscribed and paid-up by Byramjee Jeejeebhoy (P) Ltd. Thus, assessee was 100 per cent subsidiary of Byramjee Jeejeebhoy (P) Ltd. agreement was entered into between assessee and parent company on 1st Nov., 1975 to effect that some of assets and liabilities of parent company were transferred to t h e assessee at book value, i.e., Rs. 17,630. parent company held extensive lands in and around city of Bombay. It had entered into agreement dt. 25th Jan., 1964, for sale of land measuring 723 acres at Oshiwara near Jogeshwari to New Swastik Land Development Corporation, partnership firm. Out of these 723 acres, 181 acres of land were notified by Government of Maharashtra on 22nd April, 1960 for acquisition under Land Acquisition Act, 1894. There was supplementary agreement on 29th July, 1970 between parent company and New Swastik Land Development Corporation to effect that 181 acres of land sought to be acquired by Government of Maharashtra were excluded from agreement dt. 25th Jan., 1964, in consideration of which firm was to be given one-third of compensation, when fixed and received from Government in respect of 181 acres of land sought to be acquired by Government of Maharashtra. sale consideration for balance of 542 acres of land was, accordingly, reduced to Rs. 18.92 lakhs only. By virtue of agreement dt. 1st Nov., 1975, assessee got these 181 acres of land from parent-company, subject to acquisition proceedings in progress before Government of Maharashtra in respect thereof. In February 1979, assessee received amount of Rs. 99.16 lakhs by way of compensation from Government of Maharashtra in respect of 181 acres of land acquired by Government of Maharashtra. Out of this amount, assessee had paid amount of Rs. 32.7 lakhs, to Oshiwara Land Development Corporation (P) Ltd., being successor-in-interest to Swastik Land Development Corporation, and amount of Rs. 15,61,083 in respect of balance of 642 acres of land originally agreed to be sold by assessee to New Swastik Land Development Corporation. 9. parent company had also land measuring 3,257 sq. yds. at Parel in Bombay City. This land was acquired by Bombay Municipal Corporation by resolution dt. 20th June, 1964. cost in respect of this land and building thereon and legal expenses pertaining thereto amounted to Rs. 87,561 as per books of parent company. During accounting period, assessee received compensation of Rs. 1,89,508 from Bombay Municipal Corporation in respect of this land. 10. ITO for detailed reasons mentioned by him in assessment order, has proceeded to tax entire surplus out of compensation and sale proceeds received in respect of Oshiwara land after deducting cost thereof, as well as Parel land, amounting to Rs. 82,91,400 as business income of assessee as detailed under : Rs. Rs. Compensation received from Government of Maharashtra in 1. February 1979 in respect of 181 99,16,000 acres of land at Oshiwara, Jogeshwari. Less : Compensation paid to Oshiwara Land 32,70,000 Development Corporation (P) Ltd. 66,46,000 Sale proceeds received from Oshiwara land 2. Development 15,61,083 Corporation (P) Ltd. in respect of 542 acres. 82,07,083 Less : Cost of Oshiwara land to assessee as 17,630 81,89,453 shown in balance sheet. Compensation received from Bombay Municipal 3. 1,89,508 Corporation in r e s p e c t of Parel land. Rs. Less : Cost 8,885 (a) Land (b) Building 62,373 (c) Legal 23,303 87,561 1,01,947 expenses 82,91,400 main reason for taxing this surplus as business income was finding o f ITO that transaction by assessee was clearly in nature of business. 11 . assessee appealed before CIT(A) against order of ITO in this respect. It was case of assessee before CIT(A) that assessee was investment company and amounts realised by assessee were by way of realisation of investments and as such were capital receipts. assessee as well as parent company had always been treated as investment company by Department. As property in question was already under acquisition, there was no question of any dealing in it. assessee was not treated as dealer in respect of any other assets and profits on sale of land had been assessed as capital gain all along. assessee-company was not formed with idea of taking over certain assets of parent company and dealing with them, but mainly for administering these assets. CIT(A) took note of articles and memorandum of association of assessee-company, which authorised assessee to carry on business. CIT(A) upheld action of ITO on basis of articles and memorandum of association and agreement between assessee and parent company, repetition of sale of certain properties year after year and finally, intention of assessee as could be ascertained from nature of dealings to make maximum profits out of transaction. 12. assessee has filed second appeal before Tribunal against order of CIT(A) upholding treatment of amount of Rs. 82,91,400 as business income. learned representative for assessee, in support of grounds of appeal, has proceeded to point out that estate was originally held by family of Sir Byramjee Jeejeebhoy Bart. Later on, for proper administration of estate, entire property was transferred to Byramjee Jeejeebhoy (P) Ltd. Owing to certain compelling domestic circumstances in this family, present assessee-company was incorporated with view to take over and administer part of estate efficiently. part of estate belonged to one branch of family. Neither parent company nor assessee had at any time indulged in any business activity either in past or even during accounting period. agreement to sell in respect of 542 acres of land to New Swastik Land Development Corporation by parent company, was in process of gradual realisation of assets of parent company. acquisition of 181 acres of land at Oshiwara was by statutory action taken by Government of Maharashtra under Land Acquisition Act for some public purposes. Even acquisition of 3,257 sq. yds. of land at Parel was similarly acquired by Bombay Municipal Corporation for some public purposes. entire net receipts of Rs. 82,91,400 had accrued to assessee during previous year not as result of any business activity on part of assessee but either as result of acquisition proceedings initiated by Government of Maharashtra and Bombay Municipal Corporation and sale proceeds of part of asset agreed to be sold by parent company decade and half before incorporation of assessee company. It was submitted by learned representative that matter had come up earlier before Tribunal for asst. yr. 1976-77 in IT Appeal No. 1352 (Bom) of 1980 decided by Tribunal on 14th March, 1981, where question was regarding ascertainment of capital gains on transfer of certain land. Departmental authorities had not treated transaction for that assessment year as business venture. But it was treated as capital transaction resulting in capital gain. only dispute was, what was cost of land as on 1st Jan., 1964. Further, our attention was invited by learned representative to assessments made by same ITO for asst. yrs. 1976-77, 1977-78 and 1978-79, where assessee has been treated to be investment company by describing it as such. Even during accounting period, assessee had not indulged in any business activity. learned representative has, in this connection, referred us to dicta laid down by Supreme Court and various High Courts in following cases CIT vs. P.K.N. Co. Ltd. (1966) 60 ITR 65 (SC), Janki Ram Bahadur Ram vs. CIT (1965) 57 ITR 21 (SC), Raja Bahadur Kamakhya Narain Singh vs. CIT (1970) 77 ITR 253 (SC), Saroj Kumar Mazumdar vs. CIT (1959) 37 ITR 242 (SC), G. Venkataswami Naidu & Co. vs. CIT (1959) 35 ITR 594 (SC), Senairam Doongarmall vs. CIT (1961) 42 ITR 392 (SC), CIT vs. Radheshyam R. Morarka (1978) 7 CTR (Bom) 675 : (1981) 127 ITR 11 1 (Bom) and Ch. Atchaiah vs. CIT 1984 19 Taxman 265 (AP). 13. It was submitted by learned representative for assessee that in all these cases, Supreme Court and learned Judges of various High Courts had held that stray transaction here and there for realisation of capital assets did not make transaction as business activity. Reference was also made to Tribunal's decision in J.D. & Co. (P) Ltd. vs. ITO (IT Appeal Nos. 3350 to 3356 (Bom). of 1980, dt. 14th Jan., 1982), wherein similar decision has been taken. In circumstances it was submitted that decision on part of lower authorities to treat these receipts as resulting from business transaction and, hence, taxing it under s. 28 of Act should be vacated. It was assessee's case that compensation in respect of land at Oshiwara and Parel and sale proceeds received from Oshiwara Land Development Corporation (P) Ltd., was capital receipt not liable to be treated as income from business. It was submitted that net receipt from all these three items could at best have been assessed to capital gains tax. 14. On behalf of Revenue, learned Departmental Representative has proceeded to refer to Supreme Court decision in case of Sole Trustee, Loka Shikshana Trust vs. CIT 1975 CTR (SC) 281 : (1975) 101 ITR 234 (SC). It was submitted that intention of assessee was to exploit rights of assessee in various assets taken over from parent company. Therefore, this was case of business activity and, hence, income was properly taxed under head 'Profits and gains of business or profession'. 15. We have carefully considered facts and circumstances of case and arguments on either side. assessee has been incorporated as company w.e.f. 11 th June, 1975. We are told that main object of company was efficient management of assets of one branch of family. It took over assets and liabilities pertaining to that branch of family by agreement dt. 1st Nov., 1975. assets included large plot of land at Oshiwara and some land at Parel. Out of these lands, 723 acres of land at Oshiwara were agreed to be sold by agreement dt. 25th Jan., 1964 by Byramjee Jeejeebhoy (P) Ltd., i.e., parent company, which held entire shares in assessee-company too. New Swastik Land Development Corporation, partnership firm, 12 years prior to incorporation of assessee-company. Government of Maharashtra had sought to acquire 181 acres of land out of aforesaid 723 acres, that too several years prior to incorporation of assessee-company. As regards land at Parel, this was acquired by Bombay Municipal Corporation by resolution dt. 20th June, 1964. During accounting period, assessee received compensation from Government of Maharashtra and sale proceeds from Oshiwara Land Development Corporation Ltd., who were successors to New Swastik Land Development Corporation and from Bombay Municipal Corporation. net sum of Rs. 82,91,400 remained after deducting, therefrom cost of land at Oshiwara being Rs. 17,630 and land, building and legal expenses pertaining to Parel land amounting to Rs. 87,561 incurred by parent company. 1 6 . question is whether this amount represented assessee's income from 'business' ? It is assessee's case that it was not carrying on any business, income from which could be taxed under s. 28. As stated earlier, reliance is placed on orders of ITO for first three assessment years after incorporation of assessee-company, i.e., asst. yrs. 1976-77, 1977-78 and 1978-79, where assessee has been treated as investment company by ITO as also by Tribunal for asst. yr. 1976-77, in respect of which appeal was taken up before Tribunal by Departmental authorities on some other issues. Reliance is placed on voluminous case law to effect that receipts of nature of amounts received by assessee during accounting period were not business income. 17. Under s. 28, assessee is liable to be taxed to income-tax under head 'Profits and gains of business or profession', in respect of profits and gains of any business or profession which was carried on by him at any time during previous year. Patently, this is not case of assessee deriving income from any profession. question is whether income derived by it was from any business ? term 'business' has been defined under s. 2(13) of Act to include any trade, commerce or manufacture or any adventure or concern in nature of trade, commerce or manufacture. Not much guidance is available from definition under IT Act, to determine whether amounts received by assessee during year were from any business or not. Necessarily, we have to turn to judicial decisions of Supreme Court and of various High Courts to ascertain how these Courts have understood concept of business. In case of IRC vs. Marine Steam Turbine Co. Ltd. 12 TC 174, 'business' was defined by King's Bench as active occupation continuously carried on. As observed by learned Judges of Supreme Court in case of Narain Swadeshi Wvg. Mills Ltd. vs. CEPT (1954) 26 ITR 765 (SC), business or vocation is understood to connote very real, substantive and systematic course of activity or conduct for set purpose. In case of Upper India Chamber of Commerce vs. CIT (1947) 15 ITR 263 (All), learned Judges of Allahabad High Court have observed that business connotes activities in which person is engaged with set purpose. frequency or repetition of that activity, though at times decisive factor, is by no means infallible test. At same time, as observed by their Lordships of Privy Council in case of CIT vs. Shaw Wallace & Co. AIR 1932 PC 138 and learned Judges of Supreme Court in case of Liquidators of Pursa Ltd. vs. C I T (1954) 25 ITR 265 (SC), underlying expression 'business', is fundamental idea of continuous exercise of activity. In trade as well as in business, there is continuity of operation. activities organised on normally accepted commercial lines constitute essence of any business. Reference m y be made to another Privy Council decision in case of CIT vs. Currimbhoy Ebrahim & Sons Ltd. (1935) 3 ITR 395 (PC) in this connection. As further explained by learned Judges of Gujarat High Court in case of CIT vs. Motilal Hirabhai Spg. & Wvg. Co. Ltd. 1977 CTR (Guj) 674 : (1978) 11 3 I T R 173 (Guj), whether person is carrying on business in particular commodity will depend upon volume, frequency, continuity and regularity of transactions, on where, ordinarily speaking, profit motive prevails on whole transaction and on where assessee's activity can be said to be sort of organised activity. 18. Thus, as explained by Privy Council, Supreme Court and various High Courts, in order to say that assessee carried on business, there has to be some continuous activity on part of assessee. assessee came into existence on 11 th June, 1975. Thereafter, it had not taken any steps in dealing with lands under consideration, which could be called any organised activity whatsoever. 181 acres of land were acquired by Government of Maharashtra in pursuance of their notification issued several years prior to incorporation of assessee. land at Parel was acquired by Bombay Municipal Corporation in pursuance of its notification of 1964. sale proceeds of land sold to Oshiwara Land Development Corporation Ltd. materialised on finalisation of acquisition proceedings by Government of Maharashtra for part of land. Thus, it cannot be said that assessee carried on any activity whatsoever, much less continuous activity, with reference to these lands, which could be called 'business' as explained by various judicial authorities. main reliance of authorities below is on articles and memorandum of association of assessee. In this connection, following observation made by learned Judges of Supreme Court in case of CIT vs. Dharmodayam Co. 1977 CTR (SC) 341 : (1977) 109 ITR 527, is noteworthy : "It is undisputed that respondent-company, which was registered on 21st Jan., 1959, under Cochin Companies Act, has never engaged itself in any industry or in any other activity of public interest. It is notorious that memoranda and articles of association of companies usually cover variety of activities, only few of which are in fact undertaken or intended to be undertaken. That obviates necessity for applying for amendment of articles from time to time and helps to rule out possible challenge on ground that company has acted beyond its powers in undertaking particular form of activity. only activity in which respondent is engaged over years is conduct of kuries. . . ."(Emphasis supplied) As in case of Dharmodayam Co., (supra) so also in case before us, may be, articles of association or memorandum of association permitted assessee to carry on business activity. But question is whether in fact, assessee carried on any business activity during year ? answer is patently in negative. 19. As to incidence of profit from these three sources, Government of Maharashtra, Oshiwara Land Development Corporation Ltd., and Bombay Municipal Corporation, in our opinion, voluminous case law relied upon by learned representative for assessee provides adequate answer. For example, in case of CIT vs. P.K.N. Co. Ltd. (1966) 60 ITR 65 (SC) Supreme Court held that primary object of company was to take over assets of firm, to carry on business of planters and to earn profits by sale of rubber ; acquisition of estates was not for purposes of carrying on business in real estate. incidental sale of uneconomical or inconvenient plots of lands could not convert what was essentially investment into business transaction in real estate. Existence of power in memorandum of association to sell or turn into account, dispose of or deal with properties and rights of all kinds had no decisive bearing on question whether profits arising therefrom were capital accretion or revenue. profits arising from sale of properties were not taxable income. In case of Janki Ram Bahadur Ram vs. CIT (1965) 57 ITR 21 (SC), though assessee had entered into transaction of its own volition during accounting period, learned Judges of Supreme Court held that facts that assessee made profitable bargain when it purchased property and that it had desire to sell property if favourable offer was forthcoming could not, without other circumstances, justify inference that assessee intended by purchasing property to start venture in nature of trade. In case of Raja Bahadur Kamakhya Narain Singh (supra), Supreme Court held that it is fairly clear that where person in selling his investment realises enhanced price, excess over his purchase price is not profit assessable to tax. But it would be so, if what is done is not mere realisation of investment but act done of making profits. Further, in case of G. Venkataswami Naidu & Co. (supra), Supreme Court observed that if person invests money in land intending to hold it, enjoys its income for some time, and then sells it at profit, it would be clear case of capital accretion and not profit derived from adventure in nature of trade. Cases of realisation of investments consisting of purchase and resale, though profitable, are clearly outside domain of adventures in nature of trade. In deciding character of such transactions, several factors are relevant, such as, e.g., whether purchaser was trader and purchase of commodity and its resale were allied to his usual trade or business or incidental to it ; nature and quantity of commodity purchased and resold ; any act subsequent to purchase to improve quality of commodity purchased and thereby make it more readily resaleable ; any act prior to purchase showing design or purpose, incidents associated with purchase and resale, similarity of transaction to operations usually associated with trade or business ; repetition of transaction ; element of pride of possession. For deciding question before us, we have first to answer question posed by Supreme Court in case of Senairam Doongarmall, (supra) viz., before holding receipt to be profit or gains of business within s. 10 of Act, question to be asked was whether there was business at all, out of which it could be said that income arose. Where assessee did not carry on business at all, section could not be made applicable and any compensation for requisitions of assets that he received could not bear character of profits of business. compensation received by assessee did not partake of character of profits because business not having been done by assessee, no question of profits taxable to income- tax arose.. In case of Ch. Atchaiah (supra), even where assessee purchased land which had been notified for acquisition by Government, learned Judges of Andhra Pradesh High Court held that it did not constitute adventure in nature of trade so as to attract income-tax on compensation received in excess of purchase price. In our opinion, dictum laid down by learned Judges of Supreme Court in case of Sole Trustee, Loka Shikshana Trust (supra), relied upon by learned Departmental Representative, has no bearing on issues involved in this case. 20. In light of aforesaid discussion, in our opinion, assessee did not carry on any business during year. Therefore, surplus arising to it on transfer of these lands to Maharashtra Government, to Bombay Municipal Corporation and sale proceeds from Oshiwara Land Development Corporation were not income from business, which could be liable to tax under s. 28. As assessee rightly admits, these are gains received on transfer of capital asset liable to capital gains tax. In circumstances, in our opinion, matter requires to be restored to file of ITO for ascertaining capital gains on transfer of these lands in accordance with law and levy tax under head 'Capital gains' under s. 45 of Act. assessee's plea for vacating treatment of these receipts as business receipts is allowed and for treatment of these receipts as capital gains is accepted. matter is restored to file of ITO for computing income arising out of these receipts under head 'Capital gains'. 21. next ground in appeal before Tribunal is against order of CIT(A) in treating ground rent as income from other sources instead of business income as in past. assessee was earning some ground rent from lands owned by it. It was being assessed to tax under head 'Profits and gains of business or profession' in past. For year under consideration, ITO treated it as income from other sources under s. 56 of Act. His reason for doing so was that income of ground rent was fixed income, which did not involve any activity of nature of business. He, therefore, proceeded to tax it as assessee's income from other sources. On appeal by assessee, CIT(A) rejected assessee's contention that assessee being investment company, income earned from investment was business income. CIT(A) was of opinion that for determining head of receipt of income, one had to be guided by nature of receipts. Since ground rent was fixed income and no trading activity was involved in same, ITO was justified in treating it as income from other sources. 22. assessee has filed further appeal before Tribunal on ground that CIT(A) erred in confirming order of ITO in this respect. It is submitted that having regard to facts of case and provisions of law and having regard to fact that in past, this income has always been treated as business income, finding of CIT(A) was erroneous and should be set aside. On perusal of record, we find that for asst. yrs. 1976-77 and 1977-78, income has no doubt been treated as business income. But these are merely ITO's findings not subjected to any appellate scrutiny. For year under consideration, we have to arrive at fresh finding on basis of material. Though assessee has filed second appeal before us, assessee has not disclosed any activity as such to have been carried out for earning of this ground rent. We are not prepared to allow assessee's appeal on this ground merely on basis that assessee was investment company. 23. next ground on which assessee has filed present appeal is that CIT(A) erred in confirming disallowance of Rs. 9,000 under s. 40A(8) of Act. In assessment proceedings, ITO found that assessee had paid interest of Rs. 60,000 to directors on their unsecured loans. assessee claimed that s. 40A(8) had no application to facts of case as these were transferred from borrowings made by parent company. It was further stated that there were not deposits received from public. assessee relied on Tribunal, Bombay Bench decision in case of Michigam Engg. (P) Ltd. (IT Appeal No. 69 (Bom) of 1979 dt. 7th Feb., 1980). ITO rejected assessee's argument and held that amount of Rs. 9,000 i.e., 15 per cent of Rs. 60,000 had to be disallowed under s. 40A(8). In absence of any detailed facts, CIT(A) rejected assessee's appeal against this disallowance. Though assessee has filed further appeal before us, assessee has failed to produce detailed facts necessary for deciding this issue in favour of or against assessee. In circumstances, we are left with no alternative but to restore matter to ITO for bringing on record full facts regarding nature of transaction, in respect of which this interest liability had accrued to assessee and, thereafter, to decide issue in accordance with law. 24. last ground in appeal is against order of CIT(A) treating loss from race horse breeding as capital loss and not as business loss. In assessment proceedings, assessee had claimed Rs. 15,000 as expenses on horse. IAC carried forward these expenses for being set off under s. 74A(3)(b) of Act under s. 144B. assessee appealed against order of ITO in this respect before CIT(A). According to assessee before CIT(A), race horse business was also part of business activity and did not call for separate treatment. CIT(A), however, rejected assessee's plea, as according to him specific provision had been made under enactment for treatment of loss pertaining to horses. assessee has filed further appeal before Tribunal on ground that CIT(A) erred in treating loss from race horse breeding as capital loss and not as business loss. As one of objects of assessee-company was to breed and deal in horses, loss incurred under said head should have been allowed as business loss. We have carefully considered submissions on behalf of assessee. Merely because in memorandum and articles of association, assessee had mentioned breeding and dealing in horses to be one of business activities, assessee is not eligible for claim for allowance of expenses. Further, when specific provision has been made under Act, viz., s. 74A and ITO proposes to act under same, we are unable to see what grievance assessee could have in this respect. assessee's appeal on this ground is rejected. 25. In result, assessee's appeal is partly allowed. *** HERITAGE ESTATES (P) LTD. v. INCOME TAX OFFICER