1961 (3) TMI 4 - SC - Income Tax

Whether there was evidence on which the Tribunal could have come to the conclusion that the sum of ₹ 75,820 was the assessee s income from business ? Held that - The High Court answered the question correctly. No doubt, this was only a single venture ; but even a single venture may be regarded as in the nature of trade or business. When a person acquires land with a view to selling it later after developing it, he is carrying on an activity resulting in profit, and the activity can only be described as a business venture. Where the person goes further and divides the land into plots, develops the area to make it more attractive and sells the land not as a single unit and as he bought it but in parcels, he is dealing with land as his stock-in-trade ; he is carrying on business and making a profit. This is exactly what had happened in the assessee s case. The answer given by the High Court was thus correct. Appeal dismissed.

Summary

Issues:
1. Whether the sum of Rs. 75,820 was the assessee's income from business.
2. Whether the assessee is entitled to claim the money spent on the acquisition of the village of Madanapur and other related expenses as allowable deductions under section 14(5)(a) of the Hyderabad Income-tax Act.

Analysis:
The case involved an appeal by an assessee against a judgment of the High Court of Andhra Pradesh under the Hyderabad Income-tax Act. The assessee, a jagirdar, acquired a village and land, developed it, and sold plots, resulting in a substantial income. The key issues were whether this income should be considered as business income and whether the expenses incurred by the assessee were allowable deductions.

The High Court initially framed two questions for consideration, focusing on the nature of the income and the deductibility of expenses. The first question was deemed a question of fact by the High Court, which found evidence supporting the income being from a business venture. The second question was reframed by the High Court to clarify that the sale proceeds of plots should not be deducted from the expenses. The High Court ruled against the assessee on this question.

The Supreme Court, in its analysis, emphasized that even a single venture could be considered a business activity if it involved acquiring, developing, and selling land for profit. The Court concluded that the assessee's actions constituted a business venture, as he developed and sold the land as stock-in-trade, making a profit. The Court rejected the argument that the venture was solely for public welfare, noting that the evidence supported the conclusion that it was a trade or business activity.

Regarding the deductibility of expenses under section 14(5)(a), the Court clarified that this provision applied to "other sources" and not to business income. As the income from the sale of land was considered business income, the section was not applicable in this context. The Court affirmed that the income from the sale of land was correctly included in the assessable income, dismissing the appeal and ordering costs against the assessee.

In conclusion, the Supreme Court upheld the High Court's decision, ruling that the income from the sale of land was rightfully considered business income and that the expenses were not deductible under section 14(5)(a). The appeal was dismissed, and costs were awarded against the assessee.