COMMISSIONER OF INCOME TAX Vs. PREMJI GOPALBHAI

JUDGEMENT

(1.) IN this reference made at the instance of the revenue, the following question has been referred to us for our opinion :

(2.) THE assessment year under consideration is assessment year 1969 -70, and the relevant previous year is the financial year 1968 -69. The assessee, who is an individual, owned agricultural land bearing survey No. 335 on the outskirts of Rajkot City. This plot was admeasuring 7,500 square yards. This land was inherited by him from his ancestors and in 1957 -58 he converted this survey number into non -agricultural land. He divided the land into plots and sold the plots as and when a purchased was available. Prior to assessment year 1969 -70, whenever a plot of land or plots of land were sold, the profit realised by the assessee on such sales had been assessed as capital gains and at no time the assessee was treated as a dealer in land. Out of the different plots in Survey no. 335, the assessee sold two plots of land bearing plots Nos. 78 and 83 in the year 1961. The two plots together admeasured 1, 136 square yards. He realised Rs. 3,500 in 1961. However, on June 2, 1964, he repurchased these two plots, Nos. 78 and 83, for Rs. 4,900. It was contended subsequently that these plots were repurchased for the purpose of constructing a building thereon. However, no construction took place on these repurchased plots and ultimately the plots were sold on October 4, 1968, in respect of one plot and March 11, 1969, for the other plot for aggregate amount of Rs. 28,815. The gain to the assessee was Rs. 23,627. The Income -tax officer treated this as profit arising from business activity and not as capital gains. Against this decision of the income -tax Officer the assessee preferred an appeal before the Appellate Assistant Commissioner and the appeal was dismissed and the order of the Income -tax Officer was confirmed.

(3.) MR . Desai for the revenge drew our attention to the fact that, as pointed out by the Income -tax officer himself, in the year under reference, apart from the sale of these plots of land, the assessee had sold another plot of land together with the building standing thereon. This seems to be another plot of 87 square yards, not forming part of original survey No. 335. This was purchased by the assessee on February 13, 1965, for Rs. 3,250. Thereafter, the assessee constructed a superstructure on that plot and the assessee sold in the relevant previous year, that is, during the financial year 1968 -69, this plot to one Chimanlal M. Khara for the aggregate amount of Rs 18,500 and the Income -tax officer found that the profit of Rs. 3,500 resulting from the sale of the plot to Chemanlal M khara was business activity. Against the finding regarding the item of Rs. 3,500 treated as business income, no appeal was preferred to the Appellate Assistant Commissioner and the assessee seems to have been content to allow the matter to rest with the finding of the Income -tax officer. However, the amount of Rs. 23,627 was also treated as business income by the income -tax officer and the appeal was preferred by the assessee only as regards this item of Rs. 23,627.