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TMI Blog1984 (7) TMI 158X X X X Extracts X X X X X X X X Extracts X X X X ..... tivating lessees with the intention of continuing agricultural operations. The acreage in both the cases was 39 acres each. However, the lands which were adjacent were found suitable for house construction. It is at this stage they wanted to take advantage of this demand and got part of their lands plotted out. Shri Botcha Gurunaidu converted 18 acres of such land for plotting them out while Shri Botcha Appalanaidu converted 13 acres. The approved plots were 203 and 140, respectively, out of which 40 and 10 plots for Rs. 60,000 and Rs. 25,810, respectively, were sold during the year. Both the assessees apparently sold 15 acres each in the accounting year preceding the assessment year under appeal to Andhra Pradesh Non-Gazetted Officers' Co-operative House Building Society, Vizianagaram. This was not offered to tax as these were agricultural lands and could not, therefore, be treated as capital asset not having been located in a notified area. The ITO also did not attempt to bring to tax this amount apparently after getting an explanation in writing from the assessees. For wealth-tax purposes also, these lands were taken always as agricultural lands and an amount of Rs. 1.5 lakhs wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hased the lands with a view to resell the same. The fact that the assessee left space for the roads, plotted out, sold them to different persons by yardage rather than by acreage, got a price which was available for an urban building site and also undertook other operations which a dealer would take clearly justified the inference that the lands were acquired for business. Alternatively, a ground was attempted that it could have been taxed even as business profit. He claimed that he could support the orders of the authorities below with reference to such an argument as well. If the profit as from business has to be differently computed, he wanted that the matter should go back to the ITO for ascertaining the correct profits on that basis. He referred to the guidelines given by the Gujarat High Court in the case of CIT v. Manilal Somnath [1977] 106 ITR 917 in which it was pointed out that the lands were not agricultural in the year in which they were sold on the facts of that case. A pointed reference was made to a decision of the Bombay High Court in Smt. Bhanumati A. Sanghavi v. CIT [1979] 119 ITR 69 where the facts were said to be similar. Here also, it was claimed that there wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Even on 31-3-1979, these were claimed and accepted as agricultural lands. He contended that it is too well established that, acquisition with a view to resell is an essential ingredient of an adventure in the nature of trade. He insisted that the appeal should proceed only on the basis as to whether the transaction is an adventure in the nature of trade or not. At any rate, he vehemently disputed the inference that there was any business in real estate on the part of the assessees merely because they sold the agricultural lands after plotting. He claimed that the consensus of judicial opinion is that mere plotting cannot convert a realisation of investment into a business sale. He also cited authorities as to what constitutes an adventure in the nature of trade. He referred to the decision of the Gujarat High Court in CIT v. Siddharth J. Desai [1983] 139 ITR 628 as supporting him apart from the other decisions on this point. 5. We have carefully considered the facts as well as the arguments. When an asset is acquired with the sole object of selling it at a profit, it could well be a case of an adventure in the nature of trade. If the sole intention was to resell the asset at a pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue's case. In this case, the assessee acquired vast areas of lands from different persons in 1946 to 1947 and constructed on a portion of the land a Gunj and shops. Remaining area was converted into plots and were sold. The ITO, the AAC and the Tribunal in assessee's facts found that it was an adventure in the nature of trade. The Supreme Court observed in Raja J. Rameshwar Rao's case as under: "... When a person acquires land with a view to selling it later after developing it, he is carrying on an activity resulting in profit, and the activity can only be described as a business venture. Where the person goes further and divides the land into plots, develops the area to make it more attractive and sells the land not as a single unit and as he bought it but in parcels, he is dealing with land as his stock-in-trade ; he is carrying on business and making a profit....." It may be seen that the acquisition itself was taken as having been made with a view to resell. The assessee's facts are much different. But the grounds of appeal cannot probably be blamed for relying upon this decision because neither the order of the first appellate authority nor that of the ITO state the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X
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