1989 (6) TMI 108

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....ring and selling perfumes. It owned property consisting of the factory building and a huge chunk of land attached thereto. During the year under consideration, the assessee got the lay out of this land approved, cut the trees, filled the low lying areas, fixed the boundary stones, provided the drainage facilities and sold this land as house sites. Treating the profit arising on the sale of this land as a long term capital gain, the assessee in its return for the assessment year 1983-84 has claimed that the transaction in question does not involve any adventure in the nature of trade and the surplus money arising out of the sale of plots should be brought to tax only as capital gains. However, the Income-tax Officer being of the opinion that....

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....tal Representative submitted that the Commissioner (Appeals) should have held that the profits on sale of land should be assessed under the head ' Business ' only considering the assessee's intention in developing the sites and selling the same by incurring heavy expenditure after obtaining sanction of the authorities concerned. It is also submitted that the profits on sale of these lands should be assessed under the head ' business ' and not under the head ' capital gains '. In support of this, reliance was placed on the decision of the Supreme Court in the case of G. Venkataswamy Naidu & Co. v. CIT [1959] 35 ITR 594 and the decision of the Karnataka High Court in the case of CIT v. R. Ramaiah [1984] 146 ITR 39/17 Taxman 164 and the decisi....

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....at the factory building along with the land abutting thereto was purchased by the assessee. After enjoying the property for sometime the assessee has converted the land attached to the factory building into house sites after filling the low lying areas, providing drainage facilities and after obtaining sanction for construction of flats thereon. For this purpose, the assessee has incurred an amount of Rs. 90,000. In this context, the question that arises for consideration is whether the profit realised from the transaction can be said to be income arising out of an adventure in the nature of trade or it is only a transaction involving the realisation of capital investment or conversion of one form of asset into another. 6. The expression '....

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.... of the aforementioned decisions of the Supreme Court, the Madras High Court has, inter alia, observed as under : " Developing land into building sites with a view to realise the best price without anything more is consistent with realisation of a capital investment. If a land owner developed his land, expended money on it, laid roads, converted the land into house sites and with a view to get a better price for the land, eventually sold the plots for a consideration yielding a surplus, it could hardly be said that the transaction is anything more than the realisation of a capital investment or conversion of one form of asset into another." The same position has been reiterated by the Madras High Court in its recent decision rendered in t....