1980 (9) TMI 51 - HC - Income Tax

Summary

Issues Involved:
1. Whether the assessee was a dealer in immovable properties.
2. Whether Rs. 16,000 out of Rs. 24,431 could be included in the assessee's total income for the assessment year under reference.
3. Whether the amount of Rs. 24,431 received as damages could be treated as the assessee's income.

Summary:

Issue 1: Dealer in Immovable Properties
The principal question was whether the assessee was a dealer in immovable property. The Tribunal held that the assessee was not a dealer in immovable property, considering that ordinarily, the purchase of immovable property is treated as an investment. The burden of proof was on the revenue to show that the transaction was an adventure in the nature of trade, which they failed to do. The Tribunal noted that the assessee had not made significant profits from property transactions and had not been treated as a dealer in immovable property in previous assessments. Therefore, the Tribunal concluded that the assessee was not a dealer in immovable property.

Issue 2: Inclusion of Rs. 16,000 in Total Income
The Tribunal observed that Rs. 8,000 was dealt with in the assessment year 1965-66 and another Rs. 8,000 in the assessment year 1966-67. The AAC had deleted the amount of Rs. 8,000 in the assessment year 1965-66, treating it as a capital receipt, and the ITO did not bring the second Rs. 8,000 to tax in the assessment year 1966-67. Therefore, the Tribunal held that the amount of Rs. 16,000 could not be included in the assessee's total income for the assessment year 1969-70.

Issue 3: Treatment of Rs. 24,431 as Income
The Tribunal held that the amount of Rs. 24,431 received by the assessee was by way of damages due to the breach of the agreement by the vendors and not as income. The damages were for the loss of a good bargain, and thus, the amount could not be treated as the assessee's income. The Tribunal confirmed the AAC's order that the amount of Rs. 24,431 was not taxable.

Conclusion:
The High Court answered all three questions in the affirmative, in favor of the assessee and against the revenue. The Commissioner was ordered to pay the costs of the reference to the assessee.