1966 (8) TMI 4 - HC - Income Tax

Inclusion in the chargeable income of a total sum of Rs. 5, 853 representing the difference between the purchase and sale prices of two houses - In the absence of a finding by the Tribunal that the purchase and sale of the houses was in the course of a trade in property or constituted an adventure in the nature of trade no tax liability would attach to the sum of Rs. 5, 853

Summary

Issues:
1. Inclusion of income from wife's money-lending business in the husband's assessments.
2. Classification of income from agricultural lands as business income.
3. Tax liability on profit from the sale of properties as a dealer or adventurer.

Analysis:
1. The court addressed the issue of including the income of the applicant's wife from her money-lending business in the applicant's assessments. The court referred to a previous tax case and ruled against the assessee, stating that the income should be properly included in the assessments.

2. The second issue involved the classification of income from agricultural lands as business income. The court, following its judgment in a previous case, ruled in favor of the assessee, stating that the income from agricultural lands should not be classified as business income.

3. The third question pertained to the tax liability on the profit from the sale of properties, specifically Kandal House and Bishopdown House. The Income-tax Officer treated the profit as income from business, considering the purchase of the houses as part of the assessee's money-lending business. The Appellate Assistant Commissioner upheld this decision. However, the Tribunal went further, stating that the assessee habitually bought and sold properties, deeming the profits liable to tax. The court found that the Tribunal did not properly analyze whether the purchase and sale of the houses constituted a trade or an adventure in the nature of trade. The court emphasized that habitual buying and selling alone does not establish a trade or adventure in trade. As the Tribunal did not provide sufficient evidence to support its conclusion, the court ruled in favor of the assessee, stating that no tax liability would attach to the profit from the sale of the properties.

In conclusion, the court ruled against the assessee in the first issue, in favor of the assessee in the second issue, and in favor of the assessee in the third issue regarding the tax liability on the profit from the sale of properties.