TMI Blog1944 (3) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... (4) Whether there was any material on the record of this case to justify the joint assessment of the assessees as an unregistered firm ? The reference has arisen out of the assessment of a firm styled Messrs. S. D. Mehra Sons of Amritsar and the answer will govern the assessments covering the four assessment years 1934-35, 1935-36, 1936-37 and 1937-38. Up till the year 1930 Messrs S. D. Mehra Sons, carried on import and export business and were regularly assessed to Income Tax. In the year 1930 the export business and were regularly assessed to Income Tax register. The partners in the firm consisted of two brothers Kahan Chand and Kishan Chand. These two brothers sold some lands during the assessment year in question. As a result, the Income Tax Officer initiated a fresh assessment by means of an order under Section 34 of the Income Tax Act in 1936 in respect of the gains from the sales of these lands. The main question for determination in this reference is whether the sales of these lands constitute a venture in the nature of a trade such as would render the income therefrom liable to assessment. The lands sold had been acquired by two separate purchases and it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les were advertised. It is necessary to mention the details of the considerable profit thus secured, since the method and ratio of assessment in respect of these lands as adopted by the Income Tax Officer is not in question, the sole point for consideration being, as already stated, whether the profits are assessable at all. It is, however, necessary to mention that although the two brothers acted jointly in selling this land the proceeds were received by each separately according to their respective shares. The importance of this point is the bearing which it has on the fourth question formulated i.e., whether there is any material on the record to justify the joint assessment of the assessees as an unregistered firm. Thus, the essential points for determination in this reference are two : (i) whether the gains are the result of a venture in the nature of trade and therefore liable to assessment, and (ii) whether the two brothers should be assessed according to their individual shares in these gains or as unregistered firm as has been done by the Income Tax authorities. The principles governing the question whether certain transactions are or are not a venture in the nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e chosen for the purchase, the situation of the lands nearer the site selected for the Medical School, the tremendous amount of speculation going on in the purchase and sale of plots of lands in Amritsar in those years, the prospect of their development not as an agricultural colony but mainly as building sites, the yield during the period when the lands were used for agricultural purposes, the method adopted to finance the purchase at the time and the organised method adopted for the disposal of the sites. It is necessary to consider these arguments in relation to the two transactions of purchase separately. The learned Commissioner has omitted taking into account the fact that the first purchase of 378 kanals followed an agreement dated the 20th October 1918, i.e., almost a year before the preliminary land acquisition notification date the 5th November 1919. In October, 1918 there was no reason to assume the existence of any speculation fever such as is referred to in the order of Mr. Burton, Collector, Amritsar, dated the 24th May, 1920 following the notification of the 5th November 1919. We cannot assume that the purchasers who entered into this agreement in 1918 fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rose. The subsequent conduct appears to have been considered by the learned Judge who wrote the order of the mandamus Bench as irrelevant evident since he explains that the irrelevant evidence referred to in the first question would be the method of disposal adopted by the parties subsequently. We must, however, respectfully disagree that the subsequent conduct would be irrelevant evident. No doubt the governing factor is the intention of the assessee at the time of the purchase but the subsequent conduct of the assessee has certainly a material bearing on the question of his intention at the time of purchase; and we consider that the method of disposal adopted by the brothers for the sale of this area of 158 kanals is relevant and confirmed the apparent intention of the brothers to purchase with the sole object of selling at a profit. Admittedly, so far as the share of the two brothers Kahan Chand and Kishan Chand is concerned, the area was divided into plots, a lay-out plan was drawn up, the sales were advertised and the plots were sold to various portions as buildings sites. In these circumstances the mere fact that in the interval between the purchase and the date of sale, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no justification for a joint assessment of the two brothers as an unregistered firm. In our view the two brothers should be separately assessed according to their respective shares in the profits resulting from the sales of the land included in the 158 kanals purchased on the 1st April 1920. To summarize, we hold that it is neither possible nor necessary to give a clear answer to the first question except in so far as the answer emerges from our discussion on the 3rd and 4th questions. To the 3rd question our answer is that in regard to the first transaction relating to the purchase of 378 kanals there was no material for a valid finding that the intention of the assessee was to buy they land with the sole object of selling out at a profit, that the inference that the venture was a venture in the nature of trade is not justified and that the profits are not therefore assessable to tax. But in regard to the second transaction we find that the contrary is the case, that the intention in making the purchase of 158 kanals in 1920 was to sell at a profit when a convenient opportunity arose and that the inference is justified that the venture was a venture in the nature of trade ..... X X X X Extracts X X X X X X X X Extracts X X X X
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