SHIV LAL INDER NATH AND SATNAM SINGH Vs. INCOME TAX OFFICER
INCOME TAX APPELLATE TRIBUNAL
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V. Dongzathang, Accountant Member -
(1.) THESE three appeals are filed by the assessee and are directed against the orders of the Commissioner (Appeals). Since a common point is involved, they are disposed of by a consolidated order for the sake of convenience. S/Shri Shiv Lal, Inder Nath and Satnam Singh were partners of Moti Ram Ladha Ram, Delhi.
(2.) On 21-9-1970 they jointly purchased a sandy plot of land at Bhatinda, measuring 21,057 sq. yds., in equal shares. The land was partly sold on 12-3-1975. Further, sale to the tune of Rs. 2,09,875 was effected during the year under consideration. The ITO after careful consideration of the land transaction was of the view that the same was an adventure in the nature of trade. He, accordingly, treated the same as assessees' business income and equally assessed the profits at one-third of the sale proceeds after allowing the proportionate cost of land. On appeal before the Commissioner (Appeals), it was claimed that the sale of land was assessable as a capital gain as declared by the assessees. The Commissioner (Appeals), however, confirmed the order of the ITO assessing the profit from the sale of land as a business profit. The computation of the profit as worked out by the ITO was also confirmed on the basis of the decision of the Supreme Court in the case of P.M. Mohammed Meerakhan v. CIT  73 ITR 735. The assessees are still aggrieved and have come up in appeal before us.
The real question for our consideration is whether the profit realised from the transaction in question can be held to be income arising out of an adventure in the nature of trade. That means whether there are certain elements in the venture which in law would invest it with the character of a trade or business. The onus to prove the existence of these elements is undoubtedly on the department as held by the Supreme Court in the case of Saroj Kumar. Majumdar v. CIT 37 ITR 242. We, therefore, have to examine whether the inference drawn by the lower authorities that the transaction in question is a transaction in the nature of trade, is justified. To do this, it is not necessary to go into the details of every decision cited before us. As held by the Supreme Court in G. Venkataswami Naidu & Co. v. CIT 35 ITR 594, in each case it is the total effect of all relevant factors and circumstances that determine the character of the transaction.
(3.) THE relevant facts as on our records are that, that the assessees, namely, S/Shri Shiv Lal, Inder Nath and Satnam Singh, are partners of Moti Ram Ladha Ram as well as other firms. THE normal business of these firms in which the assessees are partners are in cotton or running of cotton mills or factories, etc. Admittedly, none of the firms are having any dealing in land. On 21-9-1970 they purchased a sandy plot of land at Bhatinda, measuring 21,057 sq. yds., in equal shares for a consideration of Rs. 1,08,000 from Modi Charitable Trust. THEir respective capital accounts in the firms were adjusted for the purpose. It was claimed before the ITO that the land was purchased with the intention to set up an industry or construction of a storage godown. THE assessees, however, stated that the plan was abandoned in view of the Indo-Pak war in 1971. THE entire plot of land was carved out into different plots of various measurements. Certain portions were also set apart for roads, parks and open space. Out of 21,057 sq. yds. a total area of 15,793 sq. yds. was said to have been converted into saleable plots of land. THE land was accordingly, disposed of in different lots as follows :
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