1991 (4) TMI 44 - HC - Income Tax

Court rules land acquisitions for investment, not trade. Profits as capital gains, not business income.

The court ruled in favor of the assessee for assessment years 1962-63, 1963-64, 1965-66, and 1966-67, determining that the lands acquired were for ... Business Issues Involved: The judgment involves two references made u/s 256(1) of the Income-tax Act, 1961, pertaining to different assessment years, addressing the questions of whether the intention of the applicant in acquiring land was for a trading venture and if the profits should be taxed as business income.Assessment Year 1962-63: The assessee, a company engaged in manufacturing and sale of pipes, acquired land over the years, with significant purchases from a sister concern. The court analyzed various land purchases, sales, and the nature of activities conducted on the land. Applying tests to determine if the land transactions were investments or trade ventures, it was concluded that the lands were acquired as investments, not for trading. The questions were answered in favor of the assessee.Assessment Years 1963-64, 1965-66, 1966-67: The court examined the history of land acquisitions by the assessee, including purchases from different parties and subsequent sales. It was noted that the Departmental authorities treated the surplus from land sales as business profits, contrary to the assessee's claim for capital gains taxation. By applying tests to assess the nature of land transactions, the court found that the lands were acquired as investments, not for trading purposes. Consequently, the questions were answered in favor of the assessee, with no order as to costs.