1966 (9) TMI 1 - HC - Income Tax

Amount realised by the assessee by the sale of plots - not revenue profits chargeable to income-tax

Summary

Issues:
Interpretation of whether sums realized from the sale of plots were revenue profits chargeable to income tax for specific assessment years.

Analysis:
The case involved a partnership formed in 1949 to purchase and sell bungalow sites, which was dissolved in 1956. The partners divided the remaining sites among themselves, and the assessee sold the sites he received. The central issue was whether these subsequent sales constituted business activity or mere disposal of capital assets acquired during the partnership dissolution.

The burden of proof lay on the revenue to establish that the profits were taxable. The court emphasized that merely realizing assets does not equate to trading. The authorities concluded that the assessee continued the partnership's business post-dissolution, but the court questioned if this inference was legally sound.

The court noted that the assessee did not acquire or sell any additional sites post-dissolution, and selling the allotted sites did not inherently indicate a continuation of the partnership's business. Even the auction of one site by the assessee was not conclusive evidence of business activity, as private owners can choose to auction properties.

While the revenue highlighted the inclusion of profits in the assessee's tax return as evidence of business activity, the court found this insufficient, especially since the assessee disputed the inclusion post-assessment. Ultimately, the court found no conclusive evidence that the sales were part of the assessee's business activities, citing a relevant decision by the Madras High Court.

Therefore, the court ruled in favor of the assessee, determining that the sums realized from the plot sales were not revenue profits subject to income tax. The assessee was awarded costs for the proceeding, including advocate's fees, with the question resolved in favor of the assessee.