Decided on January 15,1980


Cited Judgements :-



G.P. Singh, C.J. - (1.)THIS is a reference under Section 256(1) of the I.T. Act, 1961, made by the Income-tax Appellate Tribunal at the instance of the Dept. referring for our answer the following questions of law :
"(1) Whether, on the facts and in the circumstances of the case, the land sold by the assessee was agricultural land, the surplus on the sale of which was not chargeable to tax under the Income-tax Act, 1961 ?

(2) Whether, on the facts and in the circumstances of the case, the surplus of Rs. 4,447,Rs. 10,607, Rs. 18,944 and Rs. 6,851 realised on the sale of lands in the assessment years 1964-65, 1965-66, 1966-67 and 1967-68, respectively, represented merely a return of capital investment, not liable to tax ?

(3) Whether, on the facts and in the circumstances of the case, the surplus amounts referred to above in question No. (2) arose to the assessee-firm from an adventure in the nature of trade and hence the said amounts are chargeable to tax as income in the hands of the assessee-firm in the respective assessment years under reference ?"

(2.)THE relevant assessment years are 1964-65, 1965-66, 1966-67 and 1967-68. THE relevant previous years are the corresponding previous financial years. THE assessee is a partnership firm and has been assessed for these years as unregistered firm but treated as a registered firm under Section 183(b). THE assessee-firm consists of two partners, namely, Purandeo Sindhwani and Lalit Mohan Sachdeva.
Survey No. 12/2, area 30.02 acres, and survey No. 26, area 0.80 acres, of village Gohalpur, belonged to Baldev Prasad who was ex-malguzar of the village. By an agreement dated 6th February, 1961, Baldev Prasad and his wife, Smt. Surjanbai, agreed to sell these survey numbers in favour of Bhimsen Sachdeva, father of Lalit Mohan Sachdeva, or his nominees. The said survey numbers were sold by Baldev Prasad and his wife on 16th October, 1961, in favour of Lalit Mohan Sachdeva and Purandeo Sindhwani, the partners of the assessee-firm, for a sum of Rs. 45,000. In the sale deed the survey numbers are described as khudkasht of the vendors. Village Gohalpur is on the outskirts of the Jabalpur City and is within the corporation limits. The fact that the village is within the corporation limits, although not stated in the Tribunal's order, is apparent from the assessee's return which shows payment of municipal corporation duty of Rs. 9,000. The vendees, i.e., the partners of the assessee-firm, were about 23 years of age at the time of the purchase of the aforesaid survey numbers. They are both mechanical engineers. The family business of Lalit Mohan Sachdeva is soap manufacture and that of Purandeo Sindhwani, hardware goods.

Soon after the purchase of the aforesaid survey numbers, the vendees framed a scheme for selling the entire land by dividing it into building plots and the land was plotted out into 181 plots. The scheme was not approved by the Town Planning Board on 24th April, 1962. The colony which was to come up by sale of the building plots was named in the scheme as Sachdeva Nagar. The plots in this scheme were divided into four series, viz., A to D.

(3.)FIVE plots were sold between 28th September, 1962, and 9th May, 1963, 57 plots were sold between 22nd December, 1964, and 27th March, 1965, 36 plots were sold between 16th April, 1965, and 16th August, 1965, and 7 plots were sold between 24th August, 1966, and 27th December, 1966. The total area covered by these plots is twenty-five per cent. of the total area of the entire land.
The Madhya Pradesh Town Improvement Trust Act, 1960, was extended to the City of Jabalpur from 1st March, 1963. It appears that in December 1964, the improvement trust proposed town improvement schemes Nos. 9 and 9-A in which there was a proposal to acquire 6.26 acres of survey No. 12/2 and 0.80 acre of survey No. 26/1. A notice dated 26th December, 1964, was issued by the trust in that behalf. The partners of the assessee-firm raised objections by letters dated 9th March, 1965, and 23rd October, 1965. Although some correspondence in that respect was produced for the first time before the Appellate Tribunal, copies of these letters were not produced. It, however, appears that in these letters the partners of the assessee had stated that they had already divided the area into plots and the town planning scheme of Sachdeva Nagar framed by them had already been approved by the Town Planning Board and the Corporation. In their letter dated 27th November, 1965, the partners of the assessee-firm again said that after their town planning scheme was approved they carried out survey work and laid out plots and that 89 plots, practically all in Survey No. 12/2, had been sold out. The partners of the assessee-firm were intimated by the Town Improvement Trust that the schemes Nos. 9 and 9A had been approved by the Government on 2nd May, 1968.

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