TMI Blog1962 (8) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... acquired in the name of one Shamdas, one of the partners of the assessee firm. One of the conditions of the auction material for the purpose of this case was: That he (assessee) will within six months from the date of termination of the present war or the removal of restrictions on the construction of buildings contained in the Building (Control of Construction) Order, 1943, whichever is earlier submit to the Chief Engineer to Government for his approval the specifications, plans, elevations, sections and details of the building and compound walls hereby agreed by the Licensee to be erected on the said land..... The second material condition was: That he (assessee) will within the period of four years from the date of termination of the present war or the removal of restrictions on the construction of buildings contained in the Building (Control of Construction) Order, 1943, whichever is earlier at his own expense and at a cost of not less than Rs. two lakhs and in all respects in substantial and workmanlike manner and with new and sound materials of the best description of their several kinds...build and completely finish fit for occupation on the said plot of land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... however, was dismissed. The Appellate Assistant Commissioner held that the assertion made by the assessee that he had obtained the rights with a view of building a residential house was not borne out by the facts of the case. The rights were obtained in 1944. They were sold in 1951. Though in the intervening years the assessee had made good profits, yet during all the 6? years the assessee had not built the building on this plot of land. Having regard to the war years, the Appellate Assistant Commissioner held that the assessee had obtained the rights during the war years with a view to sell them at profit as the assessee full well knew that the prices would rise. In support of his conclusion the Appellate Assistant Commissioner also relied on a decision of this court in Gustad Dinshaw Irani v. Commissioner of Income-tax [1957] 31 I.T.R. 92. The assessee took a second appeal to the Tribunal and the Tribunal also dismissed the said appeal. Before the Tribunal, it appears, it was contended that at the time of obtaining the right to obtain a lease the assessee had assets amounting to ₹ 6 lakhs and, therefore, the assessee's contention that he wanted to build on the plot shou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears. In 1950 he assigned his rights for ₹ 32,011. The Tribunal, on the facts placed before it, held that the transaction of purchase and resale was an adventure in the nature of business and assessed the profits to income-tax. On a reference the matter came before this court. After considering the relevant decisions, the learned Chief Justice, at page 97 of the report, observed: Applying this test here, the commodity in which the moneys have been invested by the assessee is not a commodity usually utilised for the purpose of investment. One may invest in property, one may invest in shares, but one does not usually invest in an agreement to lease which has got to fructify into a lease after the building has been constructed. The second test suggested by Lord Carmont was also not satisfied in this case. There is no annual return from the property in which the investment has been made. The assessee had to pay ground rent and no question of any return arose till the property had been built. Therefore, in our opinion, the decision relied upon by Mr. Palkhivala is not of much assistance. We agree with him that the mere fact that a person buying property wishes to resell it an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid ₹ 32,748 to a society being 25% of the estimated price of the plot of land comprised in a land development scheme undertaken by the society. At that time, however, the area which the society had acquired was not in possession of the society but was requisitioned by the Government for the purposes connected with the prosecution of the Second World War. The assessee had undertaken to build within a period of six months of the lands being released from Government occupation. Later on he sold the rights obtained by him by virtue of the agreement with the society to another for a consideration of ₹ 1,07,000. The question arose whether the transaction was an adventure in the nature of trade and whether the profits made in the transaction were liable to be taxed in the hands of the assessee. The income-tax authorities as well as the Tribunal had held against the assessee. The matter was taken directly to the Supreme Court on appeal from the decision of the Tribunal. After reviewing certain authorities, their Lordships of the Supreme Court observed: ...the line of demarcation between cases of isolated transactions of purchase and sale being ventures in the nature of tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellate Tribunal that the land was purchased with the sole intention of selling it later at a profit. It will be clear that the facts of this case are entirely different from the facts of the case with which we are dealing. There at the time of the purchase the assessee had incurred an expenditure of considerable amount. It has been found that he wanted to build a residential house and a factory for his business. He expected that the land would be released by the Government but the land was not so released. His business was running in loss and in these circumstances he had sold the land. On these facts it has been found that the transaction was not an adventure in the nature of trade. The facts in this case are that at the time of obtaining the right, the assessee had expended nothing. The assessee had got possession of the property and for over three years the plot was with him. Under the agreement he had undertaken to submit plans within six months and complete the building within a period of four years. He has done nothing in that direction even though, as it has been found as a fact, he had the means to do so. On the other hand, finding the rise in the market, he ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
