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TMI Blog2007 (10) TMI 256X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion as referred is as under : "Whether, on the facts and circumstances of the case, Rs. 82,91,400 were assessable as income from business or as capital gains ?" 3. We shall first answer the question as referred on behalf of the assessee. If we answer the question as referred on behalf of the assessee in the affirmative then the question as referred to on behalf of the Revenue is not required to be answered. 4. The submission as canvassed on behalf of the assessee is that under section 153(1)(a)(iii) of the Income-tax Act no order of assessment shall be made under section 143 or section 144 at any time after two years from the end of the assessment year in which the income was first assessable, when such assessment order is an assessment year commencing on or after April 1, 1969. This is subject to what is set out in sections 144A and 144B of the Act. 5. Under section 144B where, in an assessment to be made under sub-section (3) of section 143, the Income-tax Officer proposes to make any variation in the income or loss returned which is fixed by the Board under sub-section (6), the Income-tax Officer shall in the first instance, forward a draft of the proposed orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de after the commencement of this Act, it shall be sufficient, for the purpose of excluding the first in a series of days or any other period of time, to use the word 'from', and, for the purpose of including the last in a series of days or any other period of time, to use the word 'to'. (2) This section applies also to all Central Acts made after the third day of January, 1868, and to all Regulations made on or after the fourteenth day of January, 1887." 10. It is an admitted position that the normal period of limitation under section 153(1)(a)(iii) was March 31, 1982. The Assessing Officer forwarded the draft order on March 24, 1982 and the Assessing Officer received the direction from the I. A. C. on September 25, 1982. That would be 185 days. Considering the language of Explanation 1(iv) which uses the expression "commencing from the date". When the Act is a Central enactment and has, used the expression "commencing from" and considering section 9 of the General Clauses Act, once the word "from" is used, the first in the series of days or any other period of time has to be excluded. From the chart produced by the assessee for the month of March, 8 days have been counte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Development Corporation of Survey No. 741 of village Oshiwara admeasuring 181 acres. An award was passed in June, 1971. Subsequent to the award the parent company conveyed the land under the agreement less the land acquired by the Government for a consideration of Rs. 18,92,306 as agreed to by both the parties as per the agreement dated July 29, 1970. The Government for the land acquired settled the compensation at Rs. 99,16,000. Out of this compensation in terms of the order passed by this court in Suit No. 660 of 1968, a sum of Rs. 32,70,000 was paid to New Swastik Land Development Corporation. The name of New Swastik Land Development Corporation had been changed to M/s. Oshiwara Land Development Corporation P. Ltd. The Bombay Municipal Corporation had also acquired some land and in respect of which the compensation was also paid. The amounts which are the subject matter of the notice are the amounts received as compensation from proceedings in land acquisition or from transfer of land. 14. The Assessing Officer relied on the memorandum and articles of association and set out that as per clause 3 of the main objects for which the company is incorporated one of the objects ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company was incorporated with a view to take over and administer a part of the estate efficiently which belonged to one branch of the family. Neither the parent company nor the assessee had at any time indulged in any business activity either in the past or even during the accounting period. Reference was made to the acquisition by the State of Maharashtra and B. M. C. The Tribunal noted that the assessee-company had not engaged in business and for the assessment years 1976-77, 1977-78 and 1978-79 had been treated as investment company by describing as such. In respect of the assessment year 1976-77 which had come up in I. T. A. No. 1352(Bom)/1980 decided on March 14, 1981, where the question was regarding the ascertainment of the capital gains on the transfer of certain land, the Departmental authorities had not treated the transaction for that assessment year as a business venture, but it was treated as a capital transaction resulting in a capital gain. This was the material before the Tribunal. 17. The Tribunal posed to itself a question as to whether these amounts represented the assessee's income from any business ? 18. Relying on various judgments it noted that underl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that is involved in the plunge may fall short of anything in the nature of trade. Whether it is in the nature of trade will depend on the facts and circumstances. The court noted that the question to be asked and answered is what was the dominant intention of the assessee when it purchased the share. If the dominant intention was to carry on an adventure in the nature of business, the profit can be taxed, otherwise not. Considering that the Tribunal had found that the dominant intention of the assessee was to make profit by resale of the shares and not making investment, the order of the High Court interfering with the judgment of the Tribunal was set aside and the order of the Tribunal was restored. 20. We may advert to some other judgments which would have a bearing on the issue before us as to whether the activity carried on by the assessee was an adventure in the nature of trade. In Janki Ram Bahadur Ram v. CIT [1965] 57 ITR 21 (SC) the court was considering the case where the appellant, a dealer in iron scrap and hardware, agreed to purchase all the rights of a company in a jute pressing factory installed on a piece of land. The appellant did not carry on business in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ient plots of land could not convert what was essentially an investment into a business transaction in real estate. The court then observed (page 71) : "Existence of power in the memorandum of association to sell or turn into account, dispose of or deal with the properties and rights of all kinds has no decisive bearing on the question whether the profits arising therefrom are capital accretion or revenue income". The profits arising from the sale of the properties were not taxable income. The court then noted that the question whether in purchasing and selling land the taxpayer enters upon a business activity has to be determined in the light of the facts and circumstances. The purpose or the object for which it is incorporated where the taxpayer is a company may have some bearing, but is not decisive, nor is the circumstance that a single plot of land was acquired and was thereafter sold as a whole or in plots decisive. Profit motive in entering into a trans-action is also not decisive. 22. Considering these tests, is it possible to contend that the assessee was carrying on an adventure in the nature of trade or business. The facts on record indicate that the assessee did not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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