TMI Blog1952 (4) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... alakshmi Ginning Factory Limited, Palladam, hereinafter called the company . The company purchased in 1932 a ginning factory with extensive lands appurtenant to the factory and also a plot which was somewhat removed from the factory and was in the heart of the town of Tiruppur. On this plot there were some fruit stalls. The whole lot was purchased for a sum of ₹ 33,000. The extent of the land appurtenant to the building was about 11 acres 33 cents. The site of the fruit stalls was 9 cents. Before the termination of the accounting year 1942, the buildings, the machinery and the factory were sold together with some of the land appurtenant to it for a sum of ₹ 40,000. The profit which accrued from out of that transaction was subjected to income-tax without objection during the assessment year 1942-43. Out of the vacant site of 7 acres, two acres were reserved by the assessee for erecting a cinema theatre, and the remaining 5 acres of land was parcelled out into 81 small plots in accordance with the requirements of the town-planning scheme of the Municipality and the plots were sold thereafter in public auction; and by January, 1943, 61 plots were sold which fetched a prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter of appeal before the Appellate Assistant Commissioner should not have been added to the assessable income by the Appellate Assistant Commissioner after remand as he was precluded from doing so because that amount was not the subject-matter of appeal before him. The decision on both these questions was adverse to the assessee; and at the instance of the assessee, a reference was made by the Appellate Tribunal of the two questions formulated above. The first question referred to us raises the point relating to the jurisdiction of the Appellate Assistant Commissioner under Section 31 of the Act. In the present case, the appeal in the first instance to the Appellate Assistant Commissioner was confined only to the sum of ₹ 3,800; and there could possibly be no appeal against the order of the Income-tax Officer treating the sum of ₹ 9,000 and odd as a capital receipt, for, under Section 30 of the Act the right of appeal against the order of the assessment is conferred only upon the assessee and not upon the Commissioner of Income-tax. The actual subject-matter of the appeal before the Appellate Assistant Commissioner was only the sum of ₹ 3,800. After the matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner from enhancing the assessment under Section 31(3)(a) of the Act. (Vide Commissioner of Income-tax Punjab v. Nawab Shaw Nawaz Khan [1938] 6 I.T.R. 370.) Of course, it would not be open to the Appellate Assistant Commissioner to introduce into the assessment new sources, as his power of enhancement should be restricted only to the income which was the subject-matter of consideration for purposes of assessment by the Income-tax Officer. In view of this scheme underlying the provisions of the Act, it is difficult to accept the contention strenuously urged on behalf of the assessee that the Appellate Assistant Commissioner, while dealing with the appeal after remand, was not entitled to enhance the assessment so as to include the sum of ₹ 9,397 also in the assessable income on the ground that it was not a capital receipt but was a revenue receipt. That decision may be right or wrong. But that is a matter for consideration on the merits. It seems to us difficult to draw a distinction between cases where the Assistant Commissioner was dealing with an appeal which was remanded and an appeal which was heard by him in the first instance. The only power which he could exercise in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 9,397 which represents the sale proceeds of the plots of land which were appurtenant to the factory, and a sum of ₹ 3,800 which represents the sale proceeds of the site with the buildings in which there were certain fruit shops. So far as the latter amount is concerned, there cannot possibly be any difficulty in answering the question in favour of the assessee, as that amount can, in no sense, be said to be a revenue receipt as opposed to a capital receipt. There is no element of any business in the matter of the sale of those sites and it is difficult to follow the legal basis on which a contrary conclusion was reached by the Appellate Assistant Commissioner and by the Appellate Tribunal. The sum of ₹ 9,397, in our opinion, must also be treated as a capital receipt and not a revenue receipt. It was claimed by the Department that this amount really represents profits earned by the assessee by carrying on business or at any rate an adventure in the nature of a trade; and in support of this view, a number of decisions, English and Indian, were cited, in which on a given set of facts one view or the other was held. It is. however, not possible from an examina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and facilitate the sale of the plots, it can be said, if it is a single transaction, that his activity is an adventure in the nature of trade, for, the essence of a trade, buying and selling for profit, is present in that activity. But if a person buys land with no intention of selling it and after a long interval finds it convenient to sell the land by parcelling it out into different plots and also by laying out roads and providing other amenities with a view to get more price, it cannot be said that the activity which he carried on has any element of trade, commerce or business and it cannot be said, therefore, that it is an activity in the nature of a trade. He was merely selling and did not, at the time of buying, start with the intention of buying and selling with a view to make profit. The intention must be that even at the time when the property was acquired it was so acquired for the purpose of sale with a view to make profit. In other words, the object of the acquirer was to deal in that commodity, if one may use that expression. as he deals with the goods in the course of an ordinary trade. In the absence of any such intention gatherable from the circumstances of the ca ..... 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