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Issues involved: The judgment involves determining whether the excess profit from a transaction should be considered as income assessable under the head 'Capital gains' or as income arising out of an adventure in the nature of trade.
Summary: The High Court of Allahabad was presented with a reference under section 256(1) of the Income-tax Act, 1961, regarding the assessment year 1971-72. The case revolved around an individual who purchased a property and later sold portions of it, leading to a dispute over the nature of the income generated. The Income Tax Appellate Tribunal initially held the profit as assessable under 'Capital gains', while the assessee argued that the profit should not be considered business income due to the absence of a profit motive at the time of purchase. Upon appeal, the Appellate Tribunal and the AAC considered the initial intention of the assessee at the time of purchase in determining the nature of the transaction. However, the subsequent change in conduct was not thoroughly examined. The court referred to legal precedents emphasizing that the intention to resell is a relevant but not conclusive factor in determining whether a transaction constitutes an adventure in the nature of trade. The court highlighted the importance of considering all relevant facts and circumstances to ascertain the true character of the transaction. The court concluded that essential facts regarding the subsequent conduct of the assessee were not adequately considered by the Appellate Tribunal. Therefore, the case was remitted back to the Income-tax Appellate Tribunal for a fresh determination based on a comprehensive review of all facts and circumstances. The court refrained from answering the question directly and made no order as to costs.
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