TaxTMI 
TaxTMI 
2008 (4) TMI 142
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.... as capital gain. The cases were taken up for scrutiny, and ultimately, it was found that certain number of plots were sold, and the assessee had shown the income therefrom, as long term capital gain. It is found that the assessees purchased the big chunk of land measuring few lacks square feets, somewhere in 1970, under a valid document, and the land was lying fellow, during all this time. It also appears that the land was under the cloud of ceiling laws, and after it got cleared therefrom, the assessees picked up the idea of disposing it of by making the best profit, i.e. by ensuring that it fetches the best price, and accordingly, the site plan was prepared, showing the land to be divided into different plots, and the plots were accordingly sold. The different assessees sold different plots during different period of time, inasmuch as, Sohan Khan had sold certain plots during the relevant year for the assessment year 1993-94, 1994-95 and 1995-96 and some plots still continued to remain, while the assessee Mohan Khan had also sold certain plots during the relevant year for the assessment year 1994-95. These appeals relate to the assessment year 1994-95. 4. The Assessing Officer ....
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....o appeal had been filed against that order. However, in case of Mohan Khan, it has been found, that the CIT had rightly come to the conclusion, that the sale consideration is to be taxed under the head of "capital gain" instead of "business income". For arriving at this conclusion, it was also found, in case of Mohan Khan, that the assessee had purchased the land in 1970, and thereafter no land is purchased, and no land was sold. It was found, that it seems, that assessee never had any intention to carry on any business in purchase and sale of land, but he invested the money in the land, with a motive of investment in capital asset, as there was no proof of development on this piece of land, coupled with the fact, that the assessee is not a dealer in purchase and sale of land, thus the conclusions inferred by the Assessing Officers are not valid. 8. Arguing the appeal, the learned counsel for the Revenue placed strong reliance on the judgment of Hon'ble the Supreme Court, in G. Venkataswami Naidu & Co. Vs. Commissioner of Income-Tax, reported in [1959] 35 ITR 594, and submitted, that in that case also the isolated transaction of purchase and sale of land, was held to be taxable as....
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....ome before the courts in tax proceedings. It would besides be inexpedient to make any attempt to evolve such a rule or formula. Generally speaking, it would not be difficult to decide whether a given transaction is an adventure in the nature of trade or not. It is the cases on the border line that cause difficulty. If a person invests money in land intending to hold it, enjoys its income for some time, and then sells it at a profit, it would be a clear case of capital accretion and not profit derived from an adventure in the nature of trade. Cases of realisation of investments consisting of purchase and resale, though profitable, are clearly outside the domain of adventures in the nature of trade. In deciding the character of such transactions several factors are treated as relevant. Was the purchaser a trader and were the purchase of the commodity and its resale allied to his usual trade or business or incidental to it? Affirmative answers to these questions may furnish relevant data for determining the character of the transaction. What is the nature of the commodity purchased and resold and in what quantity was it purchased and resold? If the commodity purchased is generally the....
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....apply the test of the initial intention to resell in distinguishing adventures in the nature of trade from transactions of investment. Even in the application of this test distinction will have to be made between initial intention to resell at a profit which is present but not dominant or sole; in other words, cases do often arise where the purchaser may be willing and may intend to sell the property purchased at profit, but he would also intend and be willing to hold and enjoy it if a really high price is not offered. The intention to resell may in such cases be coupled with the intention to hold the property. Cases may, however, arise where the purchase has been made solely and exclusively with the intention to resell at a profit and the purchaser has no intention of holding the property for himself or otherwise enjoying or using it. The presence of such an intention is no doubt a relevant factor and unless it is offset by the presence of other factors it would raise a strong presumption that the transaction is an adventure in the nature of trade. Even so, the presumption is not conclusive; and it is conceivable that, on considering all the facts and circumstances in the case, th....