GHOSE ESTATES Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) The Tribunal has referred the following question of law under Section 256(1) of the I.T. Act :

(2.) The assessee is a partnership firm. This reference relates to the assessment year 1969-70 for which the previous year of the firm ended on March 31, 1969. The assessee had purchased a plot of land measuring about 10 acres at Chowhatti within the municipal area of Sonarpur, in the District of 24-Parganas. During the year under consideration, the assessee sold 2/3rds of the said plot of land in two lots to a Co-op. Housing Society and made a profit of Rs. 60,582. The ITO held that the amount in question was business income of the assessee. The assessee preferred an appeal to the AAC and contended that the land in question was purchased for the purpose of agricultural operations, but had to be sold due to political disturbances in that area, at that time. It was also contended that the land remained in the ownership of the assessee for six consecutive years and the assessee had incurred expenses every year for agricultural operations. The AAC, however, affirmed the assessment order of the ITO and observed that the expenses incurred by the assessee were too small to be of any significance and were barely sufficient to cover the salary of a watchman. The AAC also observed that the balance-sheet of the firm showed that in the first year, the expenses were incurred for development of the land and not for carrying out any agricultural operations. Considering all these facts, the AAC held that the land was held as stock-in-trade of the assessee who was a dealer in real estates.

(3.) On further appeal, the Tribunal considered the facts that were placed before it and came to the conclusion that the assessee held the land as stock-in-trade of its business. The Tribunal in coming to this conclusion took note of Clause 2 of the partnership deed which provided as follows: