TMI Blog2008 (4) TMI 142X X X X Extracts X X X X X X X X Extracts X X X X ..... f law, as framed reads as under:- "Whether taking into consideration the various factors discussed by the learned Assessing Officer and other appellate authorities, the true nature of Nagnechi Scheme and Vallabhgarden land is an adventure in the nature of trade or it is merely a transaction of transfer of capital asset?" 3. The facts of the case, as appear from the Assessing Officer's order are, that the assessee submitted returns declaring particular income as capital gain. The cases were taken up for scrutiny, and ultimately, it was found that certain number of plots were sold, and the assessee had shown the income therefrom, as long term capital gain. It is found that the assessees purchased the big chunk of land measuring few lacks square feets, somewhere in 1970, under a valid document, and the land was lying fellow, during all this time. It also appears that the land was under the cloud of ceiling laws, and after it got cleared therefrom, the assessees picked up the idea of disposing it of by making the best profit, i.e. by ensuring that it fetches the best price, and accordingly, the site plan was prepared, showing the land to be divided into different plots, and the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore us, therefore, we need not go into that. 7. Aggrieved of the order of the learned Commissioner, the Revenue also filed an appeal before the learned Tribunal, and the learned Tribunal found, that the sale proceeds is to be considered as "capital gain" only. In this regard, in case of Sohan Khan, the Tribunal relied upon the fact, that in the earlier assessment year 1993-94 of this assessee himself, it had been taxed as "capital gain" only, and we are informed, that no appeal had been filed against that order. However, in case of Mohan Khan, it has been found, that the CIT had rightly come to the conclusion, that the sale consideration is to be taxed under the head of "capital gain" instead of "business income". For arriving at this conclusion, it was also found, in case of Mohan Khan, that the assessee had purchased the land in 1970, and thereafter no land is purchased, and no land was sold. It was found, that it seems, that assessee never had any intention to carry on any business in purchase and sale of land, but he invested the money in the land, with a motive of investment in capital asset, as there was no proof of development on this piece of land, coupled with the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the nature of trade", correctness of which view was challenged before the Hon'ble Supreme Court. The expression "adventure in the nature of trade" is defined in Section 2(4) of the Act, and Hon'ble the Supreme Court considered various judgments of House of Lords and other decisions of the Court of Appeal etc., and then, at page 609 of 35 ITR it was held as under:- ".....it is impossible to evolve any formula which can be applied in determining the character of isolated transactions which come before the courts in tax proceedings. It would besides be inexpedient to make any attempt to evolve such a rule or formula. Generally speaking, it would not be difficult to decide whether a given transaction is an adventure in the nature of trade or not. It is the cases on the border line that cause difficulty. If a person invests money in land intending to hold it, enjoys its income for some time, and then sells it at a profit, it would be a clear case of capital accretion and not profit derived from an adventure in the nature of trade. Cases of realisation of investments consisting of purchase and resale, though profitable, are clearly outside the domain of adventures in the nature of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the facts before us. In this connection it would be relevant to refer to another test which is some times 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 nature of trade. There is no middle course and no halfway house. This statement may be broadly true; and so some judicial decisions apply the test of the initial intention to resell in distinguishing adventures in the nature of trade from transactions of investment. Even in the application of this test distinction will have to be made between initial intention to resell at a profit which is present but not dominant or sole; in other words, cases do often arise where the purchaser may be willing and may intend to sell the property purchased at profit, but he would also intend and be willing to hold and enjoy it if a really high price is not offered. The intention to resell may in such cases be coupled with the intention to hold the property. Cases may, however, arise where the purchase has been made solely and exclusively with the inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actions of sale only, by selling the part of the whole land, purchased in one go, or purchased once upon a time, in piecemeal, would not render the activity of sale to be an "adventure in the nature of trade". In the present case, there is nothing to show, that the land was purchased with intention to sale it at a profit, or with requisite intention, to bring it within the parameters of "stock in trade". It is not shown, that the assessee is a regular dealer in real estate. It appears, that the land was purchased in 1970, which was under cloud of Land Ceiling Laws, and after that cloud was cleared, and other adjoining lands had been developed, and since the land was not yielding any return, it was decided to be sold in piecemeal, by earmarking plots, but then nonetheless it would remain a disposal of the capital asset only, and not a transaction of any "stock in trade" so as to be described as "adventure in the nature of trade". Obviously therefore, it is liable to be taxed only, as the capital gain. 14. It is the different story, that the question, as to whether a particular transaction falls within the category of "adventure in the nature of trade", or is merely a transaction ..... 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