1977 (8) TMI 43 - HC - Income Tax

Summary

Issues involved: Determination of whether surplus realized on the sale of land should be assessed as capital gains or business profits.

Summary:
In the case under consideration for assessment year 1969-70, the individual assessee sold two plots of land in 1961, repurchased them in 1964, and sold them again in 1968 and 1969, resulting in a gain of Rs. 23,627. The Income-tax Officer treated this gain as business income, but the Appellate Tribunal held that it should be assessed as capital gains. The revenue contended that the repurchase and subsequent sale of the plots constituted an adventure in the nature of trade. However, the High Court, following legal precedent, emphasized that the burden lies on the revenue to establish such characterization. The court found that the totality of circumstances did not support the conclusion that the assessee was a dealer in land or engaged in a trade activity. The court noted that previous sales by the assessee were treated as capital gains, indicating a consistent pattern. Additionally, the ancestral nature of the land and the specific circumstances of the repurchase were considered in favor of the assessee. Ultimately, the court upheld the Tribunal's decision to treat the gain as capital gains, ruling in favor of the assessee and directing the revenue to pay the costs of the reference.

This judgment highlights the importance of considering the specific facts and circumstances of each case in determining whether a transaction constitutes an adventure in the nature of trade, emphasizing the burden of proof on the revenue to establish such characterization.