COMMISSIONER OF INCOME TAX Vs. DAHANUKAR W L

JUDGEMENT

(1.) THE Short question that the arises for our determination on this reference relates to a transaction of sale of certain lands by the assessee to himself and another person. The land was sold by the assessee to a partnership firm consisting of himself and another and what we have to determine is whether the difference in the price at which the land was purchased by the assessee and the price which the partnership firm agreed to pay for the land represents the profit of the assessee.

(2.) THE assessee contracted to purchase certain lands for Rs. 41,500. Before the sale deed was executed, he entered into a partnership agreement with one Datar and the business of that partnership was to develop the land and sell it. The assessee's contribution towards the capital of the firm was Rs. 36,000 and Datar's contribution was Rs. 24,000. Their shares in the profits and losses of the business were in the same proportion. The partnership firm took over the land from the assessee at the agreed price of Rs. 90.000 and the land was conveyed to the name of the partnership firm by the vendor of the assessee. In making assessment on the assessee, the Income -tax Officer treated the difference between Rs. 90,000 and Rs. 41,500, i.e., Rs. 48,500, as the profit of the assessee from the venture of purchase and sale of the land.

(3.) THE case was referred to a third Member and the points which the third Member was asked to decide were these :