2004 (10) TMI 28 - HC - Income Tax

High Court affirms Tribunal decision on business income exclusion. Intent, ownership crucial.

Commissioner of Income-Tax Versus Smt. Radha Bai.

The High Court upheld the Tribunal's decision to delete business income from the assessee's income. The Court found that the assessee's intention was to ... 'Whether, Tribunal was right in holding that there was no adventure in the nature of trade and thereby deleting business income of Rs. 11,87,387 from the income of the assessee?' - Tribunal, arrived at a finding that the assessee continued to remain the owner of the land in question and though she had given the power of attorney in favour of the builder and promoter to start the booking of various flats and to receive sale price, etc., she was to remain responsible for the payments of all rates, taxes, duties, charges, etc., up to the date of registration of the flats in favour of the prospective buyers and the sale deed in favour of the prospective buyers were to be executed jointly by the assessee and the builder and promoter. There was no adventure in the nature of trade so far as the assessee is concerned - Thus it could not be said that the assessee had thrown the land in question into any business as her stock-in-trade - no infirmity in tribunal's finding Issues:1. Whether the Tribunal was right in holding that there was no adventure in the nature of trade and deleting business income from the assessee's incomeRs.Analysis:The High Court was tasked with deciding whether the Tribunal's decision to delete business income of the assessee was correct. The case revolved around the assessee, an individual involved in a money-lending business, who acquired a plot of land exceeding the permissible limit under the Urban Land Act. Despite facing restrictions, the assessee obtained exemption for constructing group housing on the plot and entered into an agreement with a builder for Rs. 20 lakhs. The Revenue argued that the receipts were from a joint business venture and thus taxable as business income. The Commissioner of Income-tax upheld this view. The Revenue relied on clauses of the agreement and legal precedents to support their stance.The High Court analyzed the facts and legal principles extensively. It considered the initial intention of the assessee, subsequent events, and the nature of the transaction to determine if it constituted an adventure in the nature of trade. Reference was made to the Supreme Court's decision emphasizing factors like the intention to resell for profit, the nature of the commodity, and acts before and after purchase. Additionally, the Court cited an Allahabad High Court case highlighting the importance of the initial intention of the purchaser and subsequent conduct in determining if a transaction amounts to an adventure in trade.In comparing the facts of the present case to the legal precedents cited, the Court found that the assessee's intention was to transfer the land, not the constructed portion. The agreement's clauses mainly outlined the payment terms, indicating no intent to treat the land as stock-in-trade. The Tribunal's finding that there was no adventure in the nature of trade was upheld, emphasizing that the assessee remained the landowner, responsible for various obligations. Consequently, the Court ruled in favor of the assessee, disposing of the reference against the Revenue.