1982 (8) TMI 26 - HC - Income Tax

Adventure In The Nature Of Trade, Agricultural Land, Appeal To AAC, Business Income, Finding Of Fact, House Property, Income From Property

Summary

Issues Involved:
1. Ownership of 1/3rd share in the property known as "Krishan Bagh Kothi."
2. Income derived from the sale of plots as an adventure in the nature of trade.
3. Right of appeal against the levy of interest under sections 139(1) and 217 of the Income Tax Act.

Detailed Analysis:

Issue 1: Ownership of 1/3rd Share in the Property Known as "Krishan Bagh Kothi"

The assessee claimed that his share in the rental income from the property should be 1/9th instead of 1/3rd, arguing that his 1/3rd share was further divided among himself and his two sons. The assessee presented decrees from the Civil Court to support this claim. However, the Income Tax Officer (ITO) did not accept these decrees as they were passed after the assessment year ended on March 31, 1971. The Tribunal found that the assessee failed to prove that his sons had a share in his 1/3rd portion. The High Court agreed with the Tribunal's findings, stating, "the decrees and the awards, in the circumstances of the case, were rightly ignored." Thus, the answer to this question was returned in favor of the Revenue and against the assessee.

Issue 2: Income Derived from the Sale of Plots as an Adventure in the Nature of Trade

The assessee argued that the properties were purchased for earning rental income and any income from the sale of plots should not be treated as income from an adventure in the nature of trade. The Tribunal had concluded that the assessee's actions constituted an adventure in the nature of trade, citing the conversion of land into plots and subsequent sales. However, the High Court found that the Tribunal's conclusion was based on inferences rather than concrete evidence. The Court emphasized that "no hard and fast rule can be laid down nor can an exhaustive list of criteria be given" to establish an adventure in the nature of trade. The Court referred to Supreme Court judgments, including G. Venkataswami Naidu & Co. v. CIT and Janki Ram Bahadur Ram v. CIT, which highlighted the need for considering all facts and circumstances. The Court concluded that merely carving out plots does not constitute an adventure in the nature of trade without proof of intent to sell at the time of purchase. Thus, the answer to this question was returned in favor of the assessee and against the Revenue.

Issue 3: Right of Appeal Against the Levy of Interest Under Sections 139(1) and 217

It was conceded at the Bar that, based on prior judgments of the court, the answer to this question should be in the negative. The Court referenced CIT v. Raghubir Singh and Sons and CIT v. Himalaya Woollen Mills, concluding that there was no right of appeal against the levy of interest under sections 139(1) and 217. Therefore, the answer to this question was returned against the Revenue and in favor of the assessee.

Conclusion:

The High Court ruled:
1. In favor of the Revenue regarding the ownership of the 1/3rd share in "Krishan Bagh Kothi."
2. In favor of the assessee concerning the income derived from the sale of plots not being an adventure in the nature of trade.
3. In favor of the assessee regarding the right of appeal against the levy of interest under sections 139(1) and 217.

No order as to costs was made.