KANPUR INDUSTRIAL WORKS Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE following question has been referred to this court by the Income-tax Appellate Tribunal, Allahabad Bench, at the assessees instance under section 66(1) of the Income-tax Act :

(2.) THE facts as given in the statement of the case by the Tribunal are these : THE assessee purchased certain land which was subsequently acquired by the State Government on behalf of the Development Board, Kanpur, for Rs. 10,000 and immediately the Development Board gave a part of it to him on lease for 999 years on a nominal rent after receiving the premium of Rs. 10,000. He was permitted to sell the land to anybody as a freehold property and accordingly he sold a major part of it during the accounting year for Rs. 1,26,870. During his assessment two questions arose, one whether the net receipts from the sale of the land amounted to profits of business, e.g., an adventure in the nature of trade or commerce liable to tax and the other being the quantum of the net receipts. THE Income-tax Officer held that the receipts were profits and fixed the amount at Rs. 1,16,870 by deducting Rs. 10,000 paid as the premium from Rs. 1,26,870, the sale proceeds. THE assessee filed an appeal to the Appellate Assistant Commissioner, who confirmed the Income-tax Officers finding that the receipts from the sale were profits but disagreed with the finding that Rs. 1,16,870 were the profits. THEre was no dispute that the sale of the land yielded to the assessee Rs. 1,26,870 and the real dispute was about the cost of the land to the assessee, which was to be deducted from the sale proceeds in order to determine the net receipts. THE Appellate Assistant Commissioner was of the opinion that the market price of the land should be the cost to the assessee; he did not take Rs. 10,000 paid as the premium to be the cost because it was the amount of premium and was fixed by virtue of a compromise between the assessee and the State Government during the land acquisition proceedings. On receipt of a report from the Income tax Officer that the market price of the land was Rs. 1,12,056 he determined the net receipts at Rs. 14,814 and decided the appeal accordingly. THE assessee accepted this decision, but the department did not and the Commissioner of Income tax filed an appeal before the Tribunal against it. During the hearing of the appeal the assessee filed an application before the Tribunal stating that he had not filed any appeal against the order of the Appellate Assistant Commissioner, that the appeal by the department was confined to the question of the amount of the net receipts and that "under rule 27 of the Income tax Appellate Tribunal Rules, 1946, the respondent is entitled to support the order of the Appellate Assistant Commissioner on any of the grounds decided against him though the respondent has not appealed" and prayed that he be allowed "to support the order... on the ground that the transaction was not an adventure in the nature of trade, this ground having been decided against the respondent". THE assessees counsel also pressed orally that he should be allowed to argue " on the question of assessability also in view of rule 27". THE statement of case shows that the oral submission was to the same effect as the written submission mentioned above. THE Tribunal understood this submission to be one for being permitted to argue that the sale of the land was not an adventure in the nature of trade or commerce and that, consequently, the net receipts were not profits at all and that even the amount of Rs. 14,814 did not form part of his taxable income and observed :

(3.) THIS provision reminds on of Order 41, rule 22(1), Civil Procedure Code, to the effect that "any respondent, though he may not have appealed from any part of the decree, may not only support the decree on any of the grounds decided against him in the court below but take any cross objection to the decree which he could have taken by way of appeal, provided he has filed such abjection in the Appellate Court within one month from the date of service on him or his pleader" and it is in the form of a memorandum of appeal.