COMMISSIONER OF INCOME TAX Vs. NATHALAL DAHYABHAI

JUDGEMENT

(1.) THE present reference under section 256(1) of the Income -tax Act raises the following questions for our opinion :

(2.) THE relevant assessment year is 1973 -74. The assessee being a registered -firm had entered into an agreement to purchase a plot of land. This agreement, inter alia, contained a provision that in case the vendor does not execute a sale deed, the purchase (assessee) would be entitled to refund of any amount paid towards the consideration, and also interest at the rate of 12% on such amount. There is no dispute that the assessee had paid Rs. 70,000 under the agreement in question and that since the vendor could not execute the sale deed contemplated by the agreement, the assessee in fact received Rs. 8,000 by way of interest as contemplated in the agreement.

(3.) IN appeal by the assessee, the Appellate Assistant Commissioner found that this could not be treated as business income since the transaction in question could not be treated as a business transaction; but the amount of Rs. 8,000 can be treated as capital gains of a long term nature. The Appellate Assistant Commissioner, therefore, directed the Income -tax Officer to treat it accordingly.