TMI Blog1979 (11) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... t year under consideration constituted assesees income assessable under the head 'Capital gains' and not as the income arising out of an adventure in the nature of trade ? " The brief facts are that the assessee, an individual, had purchased a house property of an area of about 20,000 sq. yards comprising of two bungalows, servant quarters and a vast piece of vacant land, in the city of Jaipur, on February 12,1968. The consideration was Rs. 87,999. Later on, the assessee divided a portion of the vacant land in sub-plots and made some improvements therein and sold a total area of 10,830.75 sq. yards by means of six sale deeds executed between the assessment years 1961-62 and .1972-73. It may be noted that the previous year of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd thereby earn any profit. Subsequently, however, when she found that the land appurtenant to the house was much more than what she required, she thought of selling a portion of the same and if thereby she earned some profit, that would not make the transaction an adventure in the nature of trade. In the opinion of the AAC, in order to bring a transaction in this category, the onus was on the department to prove that the intention of the assessee was to resell the property later on at a profit and that the department had failed to discharge such onus. He, thus, held that the profit which the assessee earned on a part of that land would constitute a capital gain and not a business profit. The revenue took up the matter in appeal before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd its subsequent motive for selling the land on profit the Supreme Court in G. Venkataswami Naidu Co. v. CIT [1959] 35 ITR 594, observed at page 610 as follows : " 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 half-way 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee and other circumstances should all be looked into with a view to determine the real character of the transaction. In CIT v. Sutlej Cotton Mills Supply Agency Ltd.[1975] ITR 706 (SC) the same principle was reiterated. The Delhi High Court in A.N.Seth v.CIT [1969] 74 ITR 852, followed the dictum laid down by the Supreme Court in G. Venktaswami Naidu Co. v. CIT [1959] 35 ITR 594. In a later case of CIT v. Raunaq Singh Swaran Singh [1972] 85 ITR 220 (Delhi), though that court referred to the decision in Venkataswami Naidu [1959] 35 ITR 594 (SC), but laid down a slightly different proposition and it was that, in order to bring a transaction within the category of an adventure in the nature of trade it has to be shown that the sole int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see and secondly, whether it was an isolated or a single instance of the business or there was a series of similar transactions. In the present case, of course, the, transactions entered into by the assessee in respect of the property concerned were not in the line of her business but they do not represent an isolated or a single instance of the business. The department had brought out certain material and it was that almost within a year of the purchase of the property the assessee divided a substantial part of the vacant land into sub-plots. That area was developed and roads were laid out and hereafter within a decade by means of six sale-transactions as much as 10,830 sq. yards of land out of the total area of 20,000 sq. yards was sold a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AAC nor the Income-tax Appellate Tribunal considered the nature of the transaction with reference to the changed circumstances and the subsequent conduct of the assessee. They were merely guided by the initial intention of the assessee when the property was purchased and regarded it as conclusive. That view is erroneous in law as we have shown above. In our opinion, therefore, the proper course for us would be to remit the case to the Income-tax Appellate Tribunal to determine the nature of the transaction with reference to all the facts and circumstances obtaining in the case and in accordance with the observations we have made above. For the reasons, stated above, we return the question unanswered and in the circumstances of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
