COMMISSIONER OF INCOME TAX Vs. A MOHAMMED MOHIDEEN

JUDGEMENT

(1.) THE instance of the Revenue, the following question of law has been referred to this court under section 256(1) of the Income-tax Act, 1961, for the opinion of this court."Whether, on the facts and in the circumstances of the case, the transaction of the assessee of purchasing the property in question under the sale deed dated April 20, 1963, and selling the same after converting it into small housing plots did not amount to an adventure in the nature of trade and the surplus arising from the sale of plots could be brought to tax only as capital gains ?" *THE brief facts of the case are as under.THE assessee, during the relevant period , was a resident of Saigon and assessed in India in the status of a non-resident. During the year 1963, the assessee purchased a property at Madras which consisted of 22 grounds and 222 sq. ft. with a dilapidated building. In the assessment proceedings for the assessment year 1970-71, the question arose whether the excess realisation from the sale of the property would be assessable as revenue profits from an adventure in the nature of trade or merely as capital accretion assessable as capital gains. In the course of the assessment proceedings for the earlier assessment year, the assessee took up the stand that the profits realised were from an adventure in the nature of trade, but the correct profits could be ascertained only after all the plots were sold and the entire amount was realised. However, in the next year, the assessee changed his stand and contended that the entire realisation from the sale of plots represented capital receipt assessable to capital gains in the respective assessment years.

(2.) THE Income-tax Officer, while examining the claim of the assessee, found that the assessee had advertised for the sale of the property in the year 1964, though the advertisement also offered the property for lease. Before the Income-tax Officer, the assessee contended that the property was purchased as an investment either to be used by his family members who were in India or, in the alternative, to derive income by leasing out the property.

(3.) THE Tribunal rejected the stand of the Department and held that the Department had not brought in any material to prove that the assessee, even at the time of purchase of the property, intended to venture in a trading activity and in the absence of any material to prove that the assessee's sale transaction was an adventure in the nature of trade, it should be accepted that the mode adopted by the assessee was only with a view to realise the best price from the sale of the immovable property.