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TMI Blog1989 (6) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... pany in which the public are not substantially interested and it carries on the business of manufacturing and selling perfumes. It owned property consisting of the factory building and a huge chunk of land attached thereto. During the year under consideration, the assessee got the lay out of this land approved, cut the trees, filled the low lying areas, fixed the boundary stones, provided the drainage facilities and sold this land as house sites. Treating the profit arising on the sale of this land as a long term capital gain, the assessee in its return for the assessment year 1983-84 has claimed that the transaction in question does not involve any adventure in the nature of trade and the surplus money arising out of the sale of plots shou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al before us is against the aforementioned order of the Commissioner (Appeals). The learned Departmental Representative submitted that the Commissioner (Appeals) should have held that the profits on sale of land should be assessed under the head ' Business ' only considering the assessee's intention in developing the sites and selling the same by incurring heavy expenditure after obtaining sanction of the authorities concerned. It is also submitted that the profits on sale of these lands should be assessed under the head ' business ' and not under the head ' capital gains '. In support of this, reliance was placed on the decision of the Supreme Court in the case of G. Venkataswamy Naidu & Co. v. CIT [1959] 35 ITR 594 and the decision of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Mohideen [1989] 176 ITR 393. 5. We have considered the rival submissions. It is not in dispute that the factory building along with the land abutting thereto was purchased by the assessee. After enjoying the property for sometime the assessee has converted the land attached to the factory building into house sites after filling the low lying areas, providing drainage facilities and after obtaining sanction for construction of flats thereon. For this purpose, the assessee has incurred an amount of Rs. 90,000. In this context, the question that arises for consideration is whether the profit realised from the transaction can be said to be income arising out of an adventure in the nature of trade or it is only a transaction involving the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. In the case of CIT v. Kasturi Estates (P.) Ltd. [1966] 62 ITR 578 (Mad.) after applying t he ratio of the aforementioned decisions of the Supreme Court, the Madras High Court has, inter alia, observed as under : " Developing land into building sites with a view to realise the best price without anything more is consistent with realisation of a capital investment. If a land owner developed his land, expended money on it, laid roads, converted the land into house sites and with a view to get a better price for the land, eventually sold the plots for a consideration yielding a surplus, it could hardly be said that the transaction is anything more than the realisation of a capital investment or conversion of one form of asset into another." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same is dismissed : 9. In the Cross Objection arising out of the same order of the Commissioner (Appeals) dated 31-7-86, the ground of appeal raised is that the Commissioner (Appeals) ought to have considered the assessee's alternative contention, namely, that the cost of the asset should be taken on the date of conversion of asset into the stock-in-trade. We have taken the view in the appeal by the department in ITA No. 2451 (Mad.)/86 that the transaction of sale of land effected by the assessee is not an adventure in the nature of trade but the sale was effected only to realise the best price from the sale of immovable property, the income arising from such a transaction is to be treated as an accretion of capital and consequently t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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