1984 (7) TMI 52 - HC - Income Tax

Summary

Issues:
1. Interpretation of whether the purchase and sale of land by the assessee constituted an adventure in the nature of trade.
2. Determination of whether the land purchased by the assessee was intended for agricultural purposes.
3. Analysis of the Tribunal's decision regarding the intention behind the purchase of the land by the assessee.

Analysis:
The Revenue sought the Tribunal to refer three questions for adjudication by the High Court, primarily focusing on whether the land purchased by the assessee was used for agricultural purposes and if the sale of land constituted an adventure in the nature of trade. The Tribunal, however, only referred question No. 2 to the High Court, which was related to whether the sale of land by the assessee did not constitute an adventure in the nature of trade. The High Court examined the facts and held that no question of law arose from the Tribunal's order, emphasizing the necessity to distinguish between questions of fact and law.

Regarding the purpose behind the land purchase, the assessee was engaged in financing the purchase of trucks but had bought three plots of land, subsequently selling them at a profit. The Income Tax Officer (ITO) considered this an adventure in the nature of trade and taxed the profits. However, the assessee contended that the land was purchased for agricultural purposes, a stance upheld by the Appellate Authority Commissioner (AAC) and the Tribunal. The Tribunal noted the installation of a tubewell and expenses incurred for agricultural purposes, supporting the assessee's claim.

The Revenue argued against the Tribunal's finding, questioning the validity of the intention behind the land purchase and the reasons for quick sales. The High Court dismissed these arguments, affirming the Tribunal's conclusion that the land was initially intended for agricultural use based on the installation of the tubewell. The Court emphasized that the assessee's intent at the time of purchase was crucial, and once established, it excluded any conflicting intentions. The Court clarified that both the Tribunal's findings on trade adventure and agricultural use were factual determinations, mutually exclusive.

In conclusion, the High Court held that no question of law was present for its opinion and ruled in favor of the assessee, rejecting the Revenue's claims. The judgment highlighted the importance of establishing the initial intention behind land purchases and reiterated that conflicting intentions cannot coexist.