ADDITIONAL COMMISSIONER OF INCOME-TAX Vs. CHIKKAVEERAYYA LINGAIAH

JUDGEMENT

(1.) The common question referred under section 256(2) of the Income-tax Act, 1961 ("the Act"), is : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the profits on sale of building sites in Survey Nos. 70/1/A and 73/A/1 were not profits derived from an adventure in the nature of trade and, therefore, not taxable as business profits for the assessment year ?"

(2.) I.T.R.C. No. 63 of 1976 pertains to the assessment year 1964-65 and I.T.R.C. No. 64 of 1976 relates to the assessment year 1965-66.

(3.) The Income-tax Appellate Tribunal ("the Tribunal") has disposed of the matter by a common order dated June 26, 1971, and the facts that we could gather from the statement of the case are these : Chikkaveerayya Lingaiah, the assessee, obtained a permanent lease in respect of two adjacent lands, Survey No. 70/1/A measuring 11 acres 02 quntas and Survey No. 73/A/1 measuring 19 acres 05 quntas. Survey No. 70/1/A was taken on lease on April 3, 1947, and Survey No. 73/A/1 was secured on July 19, 1948. On February 2, 1949, the assessee entered into an agreement with the promoters of a company called Jagadeva Business Corporation, Hubli, in regard to 10 acres of land in Survey No. 70/1/A. Earlier to that on October 18, 1948, the assessee applied for conversion of the lands for non-agricultural purposes, but due to certain subsequent developments, that application was not pressed. The assessee, however, renewed his request in 1957 and obtained permission for conversion in 1961. But his agreement entered into with Jagadeva Business Corporation ran into rough weather. There was misunderstanding between the parties which led to the filing of Special Suit No. 9 of 1963 on the file of the Civil Judge, Senior Division, Hubli, against the Corporation for the recovery of possession of the land leased and for other reliefs. The suit appears to have been compromised.