Decided on November 11,1983


Cited Judgements :-



CHADHA,J. - (1.)THIS reference under S. 256(1) of the INCOME TAX ACT, 1961 (hereinafter referred to as "the Act") at the instance of the Department raises the following question :
"Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the purchase of land by the assessee in 1958 and its acquisition by the Government in 1963 under the land Acquisition Act, 1894, did not represent an adventure in the nature of

(2.)THE facts noticed in the statement of case are these. The question arises out of the proceedings for the asst. year 1967 -68, the relevant accounting period ending on March 30, 1967. Mrs. Padma Bhandari, the assessee, had purchased land measuring 8 bighas 5 biswas in Village Kilokri near the Mathura Koad and Ring Road crossing on August 25, 1958, for Rs. 1,10,000 by adjustment of displaced persons' claims as Rs. 12,135 per bigha. On March 5, 1963, a notification under s.4 of the Land Acquisition Act 1894, was issued by the Delhi Administration notifying the land for acquisition for a public purpose, namely," planned Development of Delhi". The declaration under s. 6 of the same Act was also issued on August 22, 1963. The entire holding of 8 bighas, 5 biswas was subsequently acquired by the Delhi Administration by its award No. 1651 announced on December 17, 1963. The compensation admissible under the award was Rs. 3,500 per bigha. The assessee was not satisfied with the determination of the compensation by the award and made a petition of reference under S. 18 of the said Act for determination of the compensation by Court. The Addl. District Judge, Delhi, by judgment dated February 28, 1967, determined the compensation for the acquired land at Rs. 12,000 per bigha. As a consequence, the assessee received a sum of Rs. 1,13,850 on account of compensation and solatium for the acquisition in May, 1967. She was also awarded a sum of Rs. 16,041 as interest payable on the enhanced compensation at the rate of 6per cent per annum: "from the date the collector entered into possession till payment is made."
Before the ITO, it was claimed that the surplus realised by the assessee on the compulsory acquisition of land was not taxable under the Act either as a business profit or even as capital gain because the land so acquired was agricultural land. The ITO brought the surplus to tax as profit after holding that it was an adventure in the nature of trade. The AAC before whom an appeal was filed by the assessee reversed the finding of the ITO. The Department went up in appeal before the Tribunal (for short called "the Tribunal").

(3.)ON the facts and circumstances of the case, the Tribunal held, firstly, that there was no evidence to show that the assessee had incurred any heavy expenditure filling up the land with the intention of developing it as a building site, that, secondly, merely because the land was purchased at a high cost or the land had fetched a high price on acquisition, it would not mean that the assessee had carried out an adventure in the nature of trade, that the assessee's conduct subsequent to the purchase of land in 1958 was not that of a person who tried to develop the land as a building site for sale at profit, that the Department had failed to establish that the transaction made by the assessee in the purchase and sale of this land represented an adventure in the nature of trade. The Tribunal also held that the AAC's finding that the land was agricultural land was correct on the facts and circumstances of the case on record.

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