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Issues involved: Whether the sale of plots by the assessee is assessable to tax as income from adventure in the nature of trade for the assessment years 1968-69 and 1969-70.
Summary: The assessee purchased land jointly held by two owners, obtained permission to convert it into building sites, and sold some plots in the relevant assessment years. The Income Tax Officer (ITO) treated the income as from an adventure in the nature of trade, leading to appeals. The Tribunal considered whether the transaction was an adventure in the nature of trade and concluded it was not. The revenue raised two questions before the Tribunal: (1) whether the profit from the sale of plots could be assessed as income from adventure in the nature of trade, and (2) if not, whether it could be assessed as capital gain. The Tribunal held that the transaction did not constitute an adventure in the nature of trade. The revenue contended that the assessee's intention was to trade in real property, supported by the fact that the land was converted into building sites before sale. The Supreme Court precedent was cited to argue that the activity of dividing the land into plots and selling them indicated a business venture. The assessee argued that the intention was not to trade in real property but to invest, pointing out the time lag between land purchases and the lack of immediate conversion into building sites. However, the court found that the assessee's actions, including obtaining permission for conversion and selling plots at higher prices, indicated a business intention. The court set aside the Tribunal's finding, holding that the profit from the sale of plots was assessable as income from adventure in the nature of trade for the assessment years in question. The second question regarding capital gains tax assessment was deemed unnecessary. Therefore, the reference was answered in favor of the revenue, with costs awarded.
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