K.S. Hegde, J.
1. The question referred to this court for its opinion is :
Whether, on the facts and in the circumstances of the case, the sums of Rs. 5,114, Rs. 7,889 and Rs. 3,000 realised by the assessee on the sale of plots in the previous years ending on 30th June, 1958, 30th June, 1959, and 30th June, 1960, were revenue profits chargeable to income-tax ?'
2. In this case, the relevant assessment years are 1959-60, 1960-61 and 1961-62.
3. On January 19, 1949, the assessee and three other persons constituted a partnership with a view to carry on business on the terms and conditions contained in the deed entered into by them. In pursuance of that agreement, they purchases on January 20, 1949, in their joint names two bungalow sites in Malleswaram. The object was to convert those sites into smaller building sites and effect sales thereof. The partners appointed one among them as their power-of-attorney for the purpose of carrying on the business of the partnership. On June 6, 1956, the partnership was dissolved. By that time the firm had sold all the sites excepting 17 sites. One of the 17 sites was given to charity. The remaining 16 sites were divided between the four partners, and each of the partners got four sites. Thereafter, the assessee sold the sites that fell to his share.
4. The question now for decision is whether the sales effected by the assessee subsequent to the dissolution of the partnership was in the course of business or whether he did it as a measure of disposing of the capital assets realised by him at the time of the dissolution of the partnership. To put it in other words, whether the four sites got by him at the time of the dissolution of the partnership were dealt with by him as his stock-in-trade or whether it got them as capital assets and thereafter disposed of them as such.
5. From the material on record, we have to see whether there is any evidence to show that after the dissolution of the firm, the assessee treated the real properties allotted to him as his stock-in-trade. It may be borne in mind that the burden of proving that the profits earned are exigible to tax in of the revenue. As observed by Rowlatt J. in Alabama Coal, Iron, Land and Colonization Company Ltd. v. Mylam, 'merely realising is not trading. It is no good saying it is a trade of realising.'
6. The authorities below, after examining the material on record, have come to the conclusion that the assessee continued the very business that the partnership was carrying on till its dissolution.
7. Does the evidence on record lead to that conclusion In other words, is the inference drawn from the proved facts in accordance with law
8. It is not the case of the revenue that after the dissolution of the partnership, the assessee had purchased any other sites or sold any sites other than those that fell to his share at the time of the dissolution of the partnership. From the mere fact that he sold at the time of the dissolution of the partnership, no inference can be drawn that he wanted to continue on his own the very business of the partnership, of which he was a member.
9. One of the circumstances relied on by the Tribunal for coming to the conclusion that the assessee carried on the business of selling house sites is that he sold one of the sites by auction. From this circumstances it is not possible do draw the inference that he was selling the sites in question in the course of his business. It is open to any private owner to sell his sites by auction. The fact that the assessee did so does not in any manner lend itself to an inference other than that can be drawn in the case of any other individual.
10. One circumstance on which the learned counsel for the revenue placed a great deal of reliance in support of his contention that the sales in question were effected in the course of the assessee's business is that the assessee himself had included in his return the profits realised by him by the sale of sites during the assessment year 1959-60. The Tribunal did not place any reliance on this circumstance in coming to the conclusion that the sites in question were sold by the assessee in the course of his business. That apart, though the assessee had included the profits realised from that sale in his returns, after assessment he challenged the same in appeal and his learned counsel was allowed to contend before the Appellate Assistant Commissioner that inclusion was because of a wrong understanding of the law. From that circumstance again no firm conclusion can be drawn that the sale in question was effected in the course of business.
11. On the material before us, we are unable to come to the conclusion that the sales in question were effected in the course of the assessee's business. In this connection reference may be usefully made to the decision of the Madras High court in O. M. S. PL. A. Alagappa Chettiar v. Commissioner of Income-tax.
12. We answer the question referred to us in favour of the assessee. In other words, our answer is :
13. On the facts and in the circumstances of the case, the sums of Rs. 5,114, Rs. 7,889 and Rs. 3,000 realised by the assessee by the sale of plots in the previous years ending on 30th June, 1958, 30th June, 1959, and 30th June, 1960, were not revenue profits chargeable to income-tax.
14. The assessee is entitled to the costs of this proceeding. The advocate's fee Rs. 250.
15. Question answered in favour of the assessee.