CALCUTTA CO LTD Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference under s. 66 (1) of the Indian IT Act, made by the Calcutta Bench of the Tribunal and involves a fundamental question of some difficulty. Unfortunately, the treatment of the question by the authorities below has been of a somewhat summary character, presumably because it was raised and argued before them in a superficial form. But even if such was the case, there is hardly any justification for the Tribunal failing to realise at least what facts were required to be found and stated. The statement of the case is sketchy and bare and like most of the statements we have had to deal with during this session, has hardly any appearance of a case seriously stated.

(2.) THE question referred arises in the following way. THE assessee, the Calcutta Co. Ltd., deals in land and property and carries on that business in a form which has but recently made its appearance in this country. It buys land, develops it so as to make it fit for building purposes and sells it at a profit in plots. THE developments undertaken are, in the main, that roads are laid out, a drainage system provided and street lights installed and maintained. THE whole of the development is not carried out before the land is sold, nor is the whole of the sale price received in cash at the time of the sales. THE procedure followed is that when a plot is sold, the purchaser pays about 25 per cent of the purchase price in cash and undertakes to pay the balance with interest at a certain rate in ten annual instalments which he secures by creating a charge on the land purchased. THE company, in its turn, undertakes to carry out the developments within six months from the date of the sale but that time, as was stated before us, is not of the essence of the contract and what the company really undertakes is to carry out the developments within a reasonable time. THE undertaking is incorporated in the deed of sale itself, whereas the security is given by the purchaser by means of a separate instrument. Nothing is said in the sale deed as to the cost of the developments.

(3.) AFTER having failed even with the Tribunal, the assessee asked for a reference of the matter to this Court and in pursuance of that requisition, the following question has been referred :