1983 (11) TMI 58 - HC - Income Tax

Summary

Issues involved: Determination of whether the surplus income from the sale of sites is assessable as income from business or as a realization of capital gains.

I.T.R.C. No. 66/80: The assessee purchased agricultural land, converted it for non-agricultural purposes, formed a layout, and sold building sites. The Income Tax Officer (ITO) treated the income as business income, but the Appellate Tribunal held it to be capital gains. The Appellate Tribunal's decision was based on the assessee's intention not to carry on business, as evidenced by using the land for agricultural purposes for several years.

I.T.R.C. No. 67/80: Similar activities as in I.T.R.C. No. 66/80 were carried out by the assessee. The ITO treated the income as arising from an adventure in the nature of trade, but the Appellate Tribunal held that the income was capital receipt liable to capital gains tax due to the initial purchase of agricultural land.

I.T.R.C. No. 68/80: The assessee sold building sites formed from land purchased earlier. The ITO treated the income as business income, but both the AAC and the Tribunal ruled in favor of the assessee, considering the income as capital gains.

I.T.R.C. No. 76/80: The assessee purchased agricultural land, converted it, formed a layout, and sold sites. The ITO treated the income as business income, but the AAC and the Tribunal ruled in favor of the assessee, considering it as capital gains.

I.T.R.C. No. 77/80: The same assessee as in I.T.R.C. No. 76/80 converted land into sites and sold them. The ITO treated the income as business income, but the AAC and the Tribunal ruled in favor of the assessee, considering it as capital gains.

The court analyzed the definition of "business" under section 2(13) of the Income Tax Act, 1961, which includes any adventure in the nature of trade. The court referred to previous judgments to determine the nature of the transactions, emphasizing factors such as the intention of the purchaser, nature of the commodity, improvements made, and the continuity of transactions. The court found that the assessees' activities of purchasing, converting, developing, and selling lands as building sites fell within the definition of an adventure in the nature of trade. The assessees' actions indicated an intention to trade in lands as a venture, developing them for sale and not as long-term investments. Therefore, the surplus income from the sale of sites was deemed assessable as income from business, not as a realization of capital gains.