1985 (2) TMI 12 - HC - Income Tax

Summary

Issues involved:
1. Whether the purchase and subsequent sales of land constituted an adventure in the nature of trade?
2. Whether the profit arising from the sale of land could be assessed in the hands of the assessee as an association of persons?

Issue 1:
The court examined the purchase of 10-13 guntas of land and subsequent sales, determining it as an adventure in the nature of trade. The land was converted into building sites shortly after purchase, indicating a trading purpose rather than personal use. Factors such as the nature of the land, the intentions of the purchasers, and the quick resale for profit supported this conclusion. Citing legal precedents, the court held that even a single venture can be considered a trade, rejecting the argument that a single transaction cannot be an adventure in the nature of trade.

Issue 2:
The court considered whether the assessees should be assessed as an association of persons based on their joint purchase and sale of the land. The argument that tenants-in-common cannot constitute an association of persons was refuted, with reference to legal interpretations and previous judgments. The court emphasized that tenants-in-common can engage in income-producing activities collectively, qualifying them as an association of persons. Given the evidence of joint purchase and sale for profit, the court concluded that the four individuals formed an association of persons for income-producing purposes. Therefore, the second question was answered in favor of the Revenue.

Overall, the court found that the land transaction was a trade venture and the assessees operated as an association of persons for income generation, leading to the assessment of profits in their hands accordingly.