TMI Blog2009 (3) TMI 1001X X X X Extracts X X X X X X X X Extracts X X X X ..... stant appeal. 2. The issue which is subject-matter of consideration is, the sale of agricultural land at the hands of the respondent-assessee. The aforesaid agricultural land which was located in village Sanaur/Ghalori was sold by the respondent-assessee for a consideration of ₹ 44 ,75 ,500 , while the claim of the respondent-assessee was, that the aforesaid consideration should be considered as capital gain; the determination at the hands of the Assessing Officer was that the sale of agricultural land for a total consideration of ₹ 44 ,75 ,500 should be treated as income under the head Profit and gain from business and profession . This assertion at the hands of the Assessing Officer was primarily based on the fact, that the respondent-assessee had purchased agricultural land at substantially lower rate, and had sold it at a substantial profit. In fact the respondent-assessee is stated to have purchased the entire land for a sum of ₹ 46 ,840 , and thereafter had sold it for ₹ 44 ,75 ,000. 3. Having considered the sale of agricultural land at the hands of the respondent-assessee for a consideration of ₹ 44 ,75 ,500 under the head Profit and gai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l purposes, and as such, continued to derive income therefrom through the sale of agricultural produce. Even for the assessment year under reference the respondent-assessee declared his agricultural income at ₹ 2, 34, 000. Thirdly, there is no material on the record of this case (either in the pleadings of the instant appeal, or in the orders passed by the Assessing Officer, the CIT and the ITAT) to suggest that the respondent-assessee affected any kind of improvement in the land, so as to be able to sell the same at higher price. It is in the background of the aforesaid admitted facts that we have been called upon to determine, whether the earnings from sale of agricultural land at the hands of the respondent-assessee, should be treated as a capital gain or should be treated as income under the head Profit and gain from business and profession . 9. For the aforesaid determination, reference may be made to the decision rendered by the Supreme Court in G. Venkataswami Naidu Co. v. CIT [1959] 35 ITR 594. So as to record a finding on the issue under reference, guidelines laid down by the Supreme Court in the aforesaid judgment are extracted hereunder:- As we have al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... derations are set out and discussed in judicial decisions which deal with the character of transactions alleged to be in the nature of trade. In considering these decisions it would be necessary to remember that they do not purport to lay down any general or universal test. The presence of all the relevant circumstances mentioned in any of them may help the court to draw a similar inference; but it is not a matter of merely counting the number of facts and circumstances pro and con; what is important to consider is their distinctive character. In each case, it is the total effect of all relevant factors and circumstances that determines the character of the transactions; and so, though we may attempt to derive some assistance from decisions bearing on this point, we cannot seek to deduce any rule from them and mechanically apply it to the facts before us. In this connection it would be relevant to refer to another test which is sometimes applied in determining the character of the transaction. Was the purchase made with the intention to resell it at a profit ? It is often said that a transaction of purchase followed by resale can either be an investment or an adventure in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansactions showed that they were in the nature of trading transactions. Two facts, however, throw considerable doubt on the validity of that conclusion and neither the Tribunal nor the High Court seems to have weighed them with the consideration which they demand. The first fact is that in 1940 he converted his entire shareholding into gold, a fact consistent with his case that he did so because of the nervousness engendered by the breaking out of the Second World War, the initial German victories and the fall of France. The Tribunal did not countenance this case for it thought that if that was so, the assessee would have invested the other cash lying with him also in gold, and, secondly, because according to it the war panic started in 1942 and not in 1940. We do not think that this was an accurate approach. The fact that the assessee did not invest all his cash cannot mean, as the Tribunal thought, that his case about the purchases of gold was not correct. The war had commenced in 1939 , and it is a notorious fact that in 1940 the fortunes of the Allies were none too bright. The fact was that the assessee sold his entire shareholding and applied their sale proceeds and also a fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... significance and the second properly viewed only meant that he wanted to set apart this fund for transactions in shares and securities and not mix up his other capital and the income arising from his estate. The name he gave to this account cannot for that reason only render his dealings with that account into trading transactions, if otherwise they were not. ** ** ** As regards the Karanpura shares, the correspondence between him and the company and the advice he had from his brokers referred to in the statement of case show that the assessee did at one time entertain the idea of obtaining control over the company s management by procuring 51 per cent of its total shares. He could do so by purchasing shares in the open market and also by other means. He purchased 7 ,025 shares in the market but that was clearly not enough. There was at that time litigation going on between him and the company and he seems to have hit upon the idea that he would compromise his suit if the managing agents of the company were to sell him shares representing its unissued capital at prices offered by him. The object of his offer was that he would not have to pay the market price of the share ..... 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