Land sale as capital realisation, agricultural character, and recorded consideration upheld on factual evidence.

Land developed into plots for sale did not, on these facts, amount to an adventure in the nature of trade; the activity was treated as realisation of capital investment, so the surplus was not revenue profit. The finding that the lands remained agricultural in the relevant assessment year was upheld on the basis of the record, with the result that they fell outside the capital asset category to that extent. The disclosed sale consideration was also accepted as the actual consideration because there was no positive evidence of undervaluation and the purchasers supported the recorded amounts.

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Issues: (i) whether the sale of plots constituted an adventure in the nature of trade or was only a realisation of capital investment; (ii) whether the lands were agricultural lands so as to fall outside the capital asset category for the relevant year; (iii) whether the disclosed sale consideration was the real consideration received.

Issue (i): whether the sale of plots constituted an adventure in the nature of trade or was only a realisation of capital investment.

Analysis: The lands had been held as inherited property and the conversion of land into plots, without anything more, did not by itself establish a trading adventure. On identical facts, the governing principle was that developing land to obtain the best price is consistent with realisation of capital investment and does not, by itself, create business income.

Conclusion: The sale transactions did not constitute an adventure in the nature of trade and the surplus was not revenue profit.

Issue (ii): whether the lands were agricultural lands so as to fall outside the capital asset category for the relevant year.

Analysis: Whether the lands continued to be agricultural in nature and whether agricultural income was derived from them during the year was treated as a question of fact. The finding that the lands had not ceased to be agricultural lands in the assessment year 1960-61 was supported by the record and was not open to interference.

Conclusion: The lands were agricultural lands for the assessment year 1960-61 and were outside the capital asset category to that extent.

Issue (iii): whether the disclosed sale consideration was the real consideration received.

Analysis: The existence of undervaluation was also a factual issue. There was no positive evidence disproving the stated consideration, and the purchasers confirmed payment only of the amounts recorded in the documents.

Conclusion: The disclosed sale price was accepted as the correct consideration and no interference with that finding was warranted.

Final Conclusion: The references were answered against the Revenue on all questions, with the assessee succeeding and being awarded costs.

Ratio Decidendi: Development of land for sale, without additional trading indicia, is consistent with realisation of capital investment and does not amount to an adventure in the nature of trade; factual findings on agricultural character and sale consideration will not be disturbed absent positive contrary evidence.

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