CH ATCHAIAH Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) On 20/12/1962, the petitioner and Kondal Reddy purchased ac. 454.11 guntas of land in Manmole village, Sangareddy Taluk, Medak District, under a registered sale deed for a total consideration of Rs. 75,000. By the date of their purchased of the said lands, the lands were notified under the notification dated 17/10/1961, for acquisition by the government for the construction on a Heavy Electrical Factory. On 4/02/1964, the Land Acquisition Officer passed an award giving compensation in a sum of Rs. 1,38,794.12. But the petitioner and Kondal Reddy were not satisfied with the amount of compensation granted under the award by the Land Acquisition officer and filed a petition before the land Acquisition officer for making a reference of the matter to the civil court under s. 18 of the Land Acquisition Act. The matter was accordingly referred to the civil court. On a reference, the District Judge held enquiry into the claims and enhanced the compensation by passing an award for a sum of Rs. 3,95,020 out of which the petitioner share was Rs. 2,08,739. The ITO treated this amount of Rs. 2,08,739 received by the petitioner towards his share from out of the compensation paid by the government as income from business. The assessee preferred an appeal to the AAC contending that the land purchased by him was agricultural in character and that what was realised was only a surplus over and above the investment and this only resulted in capital accretion and as such the amount of Rs. 2,08,739 could not be taxed as business income. The AAC held as follows :

(2.) So, holding, the AAC justified the inclusion of the sum of Rs. 2,08,739 by the ITO in the total income of the assessee. The assessee was, therefore, aggrieved with the order of the AAC and hence preferred an appeal before the Appellate Tribunal.

(3.) The learned counsel for the assessee had reiterated the same conditions that were advanced before the AAC. On behalf of the assessee, it was contended that it would be difficult to regard a single or an isolated transaction as an adventure in the nature of trade or business. On behalf of the department it was contended before the Tribunal that the lands, which were purchased by the petitioner and Kondal Reddy, were admittedly after the notification and that the transaction of purchase followed by resale can either be an investment or an adventure in the nature of trade. If it is found not to be an investment, then the transaction would undoubtedly be treated as an adventure in the nature of trade and as the question of investment does not arise in the instant case for the reason that the property was purchased after the notification was issued by the government, the only conclusion that has to be arrived at is that the transaction is an adventure in the nature of trade. The Tribunal examined these contention in the light of the provisions of s. 2(13) which deals with the expression "in the nature of trade" appearing in the definition of business and also in the light of the decided cases.