PARVATHI DEVI Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) In this Referred Case No. 106 of 1979, the following two questions have been referred for the opinion of this court. The two questions are :

(2.) The facts of the case are : One Parvathi Devi, w/o Ramaswamy and one Radhakumari, w/o Umamaheswara Rao, joined with one K. Suryanarayana and V. Dasaradha Ramaiah and purchased acres 10-13 guntas (about 50,000 sq. yards) of land situated in Kheiratabad by a registered sale deed dated 17/03/1961, for a total consideration of Rs. 45,000. The land was purchased from the original owner, Mohammed Mirza, and nine others and the four persons had converted this portion of land which was of non-agricultural rocky land into building sites. Within three months after the date of purchase, the aforesaid four persons jointly entered into an agreement dated 15/06/1961, with the Posts and Telegraphs Office Co-operative Housing Society, agreeing to sell a portion of the land, viz., 20,542 sq. yards, at the rate of Rs. 4.12 per sq. yard and an advance of Rs. 4,000 was paid by the buyer-society. With respect to the balance of the land, viz., 38,382 sq. yards, the aforementioned four persons entered into another agreement dated 15/04/1962, agreeing to sell again jointly the remaining portion to one Gramodyog Co-operative Housing Society Ltd., for a total consideration of Rs. 2,11,101 which works out to Rs. 5.50 per sq. yard. An advance of Rs. 4,000 was paid by the buyer-society. In pursuance of that agreement, a document of sale was registered in favour of the said Gramodyog Co-operative Housing Society on 20/09/1962.

(3.) The question that arose before the Income-tax Officer is regarding the nature of the profit which the aforesaid four vendors had made under the above transactions. The Income-tax Officer rejected the contentions of the assessees and held that the lands are not agricultural lands and the whole transaction was an adventure in the nature of trade. Accordingly, the Income-tax Officer assessed the profits made by the assessees in the above transaction under the head "Business income". Before the Income-tax Officer, it appears that the assessees had not taken any serious objection to the contention of the Revenue that the income should be treated and assessed in the status of an association of persons of the aforementioned four individuals.