P.A. Choudary, J.
1. In this Referred Case No. 106 of 1979, the following two questions have been referred for the opinion of this court. The two questions are :
'1. Whether, on the facts and in the circumstances of the case, the purchase by the assessee of acres 10-13 guntas of land on March 17, 1961, and the subsequent sales of the land on September 4, 1961, and September 20, 1962, constituted an adventure in the nature of trade
2. Whether, on the facts and in the circumstances of the case, the profit arising on the sale of land could be assessed in the hands of the assessee as an association of persons ?'
2. The facts of the case are :
One Parvathi Devi, w/o Ramaswamy and one Radhakumari, w/o Umamaheswara Rao, joined with one K. Suryanarayana and V. Dasaradha Ramaiah and purchased acres 10-13 guntas (about 50,000 sq. yards) of land situated in Kheiratabad by a registered sale deed dated March 17, 1961, for a total consideration of Rs. 45,000. The land was purchased from the original owner, Mohammed Mirza, and nine others and the four persons had converted this portion of land which was of non-agricultural rocky land into building sites. Within three months after the date of purchase, the aforesaid four persons jointly entered into an agreement dated June 15, 1961, with the Posts and Telegraphs Office Co-operative Housing Society, agreeing to sell a portion of the land, viz., 20,542 sq. yards, at the rate of Rs. 4.12 per sq. yard and an advance of Rs. 4,000 was paid by the buyer-society. With respect to the balance of the land, viz., 38,382 sq. yards, the aforementioned four persons entered into another agreement dated April 15, 1962, agreeing to sell again jointly the remaining portion to one Gramodyog Co-operative Housing Society Ltd., for a total consideration of Rs. 2,11,101 which works out to Rs. 5.50 per sq. yard. An advance of Rs. 4,000 was paid by the buyer-society. In pursuance of that agreement, a document of sale was registered in favour of the said Gramodyog Co-operative Housing Society on September 20, 1962.
3. The question that arose before the Income-tax Officer is regarding the nature of the profit which the aforesaid four vendors had made under the above transactions. The Income-tax Officer rejected the contentions of the assessees and held that the lands are not agricultural lands and the whole transaction was an adventure in the nature of trade. Accordingly, the Income-tax Officer assessed the profits made by the assessees in the above transaction under the head 'Business income'. Before the Income-tax Officer, it appears that the assessees had not taken any serious objection to the contention of the Revenue that the income should be treated and assessed in the status of an association of persons of the aforementioned four individuals.
4. The order of assessment made by the Income-tax Officer was confirmed by the Appellate Assistant Commissioner and finally by the Income-tax Appellate Tribunal. The assessees had, therefore, applied for and obtained a reference of the above two questions for the opinion of this court.
5. The first question that has been argued at considerable length is that the purchase by the assessees of the aforementioned acres 10-13 guntas of land did not constitute an adventure in the nature of trade. It was argued by Mr. Y. Rathnakar that this purchase was a single transaction and there were no further and subsequent steps taken on the part of the assessees for the development of the land. He also referred to some statements made by one of the assessees before the Income-tax Officer to show that the purchase of these lands was not for business purpose.
6. It has been found by all the three authorities in this case that the purchase by the assessees of this Ac. 10-13 guntas of land is an adventure in the nature of trade. It is no doubt true that that finding is open to question in this reference, because the answer to such a question is never considered as one of pure fact. But we must note that the Supreme Court had observed in G. Venkataswami Naidu & Co. v. CIT 0065/1958 : 35ITR594(SC) that it is impossible to evolve any formula in determining the character of isolated transactions of purchase of lands which came before the courts in tax proceedings. Bearing that in mind, we refer to the facts of this case which, in our opinion, are decisive in answering the first question referred for our opinion.
7. The extent of the land that has been purchased is about 10 acres. It was purchased by four persons joining together. The land which has been purchased has already been converted into non-agricultural land. Its boundaries show that it is in the midst of a fully developed area. It would, therefore, be reasonable for us to conclude that the land must have been purchased not as agricultural land nor as house sites, but for only trading purposes. Among the four persons, one is a retired school teacher and another is a Government servant of a lower rank. None of them are persons who can be said to have an intention to use the land of 10 acres for the purpose of constructing houses. In these circumstances, the purpose of purchasing and keeping that land could not have been dominated by an intention to use it except as a stock-in-trade in their business. One of the assessees, Dasaradha Ramaiah, is a man of no property. He says that he borrowed money from his brother. Parvathi Devi's husband, Ramaswamy, was a person who had been dealing in purchasing and selling real estates. Parvathi Devi herself had purchased and sold house sites earlier in 1958-1960. The husband of Radhakumari, one Umamaheswara Rao, was a Government servant and the President of Venkatramana Co-operative Housing Society. The character of the land is such that it cannot be used as agricultural land nor can it be put to any other use, except as house sites. In G. Venkataswami Naidu & Co. v. CIT 0065/1958 : 35ITR594(SC) the Supreme Court indicated some of the factors which would reveal the real nature of the transaction. The questions which the Supreme Court referred to are, what is the nature of the commodity purchased and resold and in what quantity was it purchased and resold If the commodity purchased is generally the subject-matter of trade and if it is purchased in very large quantities, it would tend to eliminate the possibility of investment for personal use, possession or enjoyment. In view of the facts of this case, it is impossible for us to say that this property has been purchased for personal use or possession or for enjoyment or for investment. Immediately within three months after this property has been purchased for Rs. 45,000, the assessees had sold under a registered sale deed dated May 4, 1961, a part of this land to a house building society. Within a period of one year thereafter, they entered into an agreement with another neighbouring co-operative society agreeing to sell the remaining land which they had actually sold on September 20, 1962. Those were the days when in Hyderabad even society respected people were doing real estate business. There is also evidence to show that these four assessees were not known to each other. Considering all these facts, we have no hesitation in holding that the purchase of this land has been made not as an investment, but clearly for the purpose of trading in the land. We accordingly hold that the transaction is an adventure in the nature of trade.
8. Mr. Rathnakar had referred to several cases. In many of these cases, the courts have held that the transactions involved therein were not adventures in the nature of trade. But, we are of the opinion that no reference to, nor any discussion of, those cases would be useful, because those are all cases which have been decided on the particular facts of those cases. The only point of law Mr. Rathnakar raises in this case is that a single transaction may not be regarded as an adventure in the nature of trade. But we have the authority of the Supreme Court in Raja J. Rameshwar Rao v. CIT : 42ITR179(SC) holding that even a single venture may be regarded as being in the nature of trade or business. In view of our appraisement and assessment of the facts in this case which we have mentioned above, we answer the first question in favour of the Revenue and against the assessees.
9. The next argument of Mr. Rathnakar is that the income in the case of these assessees should not be assessed in the status of an association of persons. His argument is that the document dated March 17, 1961, under which they had purchased these lands shows that these assessees are tenants-in-common and that, therefore, tenants-in-common cannot constitute an association of persons.
10. In support of this contention, he greatly relied upon the decision in CGT v. R. Valsala Amma : 82ITR828(SC) . In that case, two sisters who had acquired some property in definite shares under a will executed by their mother had gifted away that property under one document in favour of their brother. The question was raised whether the gift is liable under the Gift-tax Act to suffer gift-tax having been made by an association of persons or as having been made by individuals. The Supreme Court ruled that each one of the donors had a right to half of the properties which they gifted to their brother and that they were holding the property and made gifts as tenants-in-common and that, therefore each one of them should be assessed as an individual though the gift was made through one single document. On that basis, the Supreme Court held that the gift was not liable to be assessed in the status of an association of persons. In that case, the Supreme Court never found that there is anything legally impossible for tenants-in-common to constitute an association of persons. In fact, it would not logically be possible to lay down that tenants-in-common can never constitute an association of persons within the meaning of either of the Gift-tax Act or of the Income-tax Act with which we are now presently concerned. In CIT v. Indira Balkrishna : 39ITR546(SC) the Supreme Court interpreted the word 'association of persons' as meaning an association in which two or more persons join in a common purpose or common action with the object of producing income, profits or gains. This definition of 'association of persons' does not render it impossible for tenants-in-common to constitute an association of persons. Where there are two or more persons associated by the bonds of income-making activity without any specification as to the method of sharing of income, they will be treated for the purpose of the Income-tax Act as an association of persons, whether they are tenants-in-common or not. A tenancy-in-common is to be contrasted with joint tenancy. A joint tenancy has to satisfy the four requirements, called the four unities, viz., unity of possession, unity of interest, unity of title and unity of time, whereas a tenancy-in-common requires only the unity of possession. This distinction between a joint tenancy and tenancy-in-common so prominent for the purpose of property law appears to us to be wholly immaterial for deciding whether two or more persons who are tenants-in-common can constitute an association of persons. The observations of the Supreme Court, therefore, cannot be understood as laying down that tenants-in-common can never qualify themselves to be members of an association of persons within the meaning of the Income-tax Act. We, therefore, find it not possible to agree with the contention of Mr. Rathnakar that the four persons in this case who had purchased the land and traded in it cannot be called as an association of persons merely because they are tenants-in-common.
11. In the above view of ours, it would not really be necessary to notice the difference of opinion that has developed over the interpretation put by this court in the above Valsala Amma's case : 82ITR828(SC) . In (sic) our High Court ruled that a group of individuals can be a body of individuals though not an association of persons within the meaning of the Income-tax Act. In so holding, a Division Bench of this court held that Valsala Amma's case : 82ITR828(SC) should be confined only to gift-tax cases. That view of our Division Bench was disagreed from either in whole or in part by the High Courts of Gujarat, Madras and Kerala. But we may note that in none of those cases any of the courts had taken the view that tenants-in-common cannot legally constitute an association of persons. After all, tenants-in-common, like all other human beings, can carry on activities, either individually or collectively, making profits, losses and gains. It would, therefore, seem to be impossible to say that two or more persons cannot associate themselves for purposes of producing income and thus constitute members of an association of persons for the purpose of making profits merely because they are tenants-in-common. We accordingly reject this argument of Sri Rathnakar advanced at great length.
12. Accordingly, we examine, in the facts and circumstances of this case, whether there is evidence to show that the-four persons have associated themselves for the purpose of producing income and making profit. The facts which have been stated above would hardly admit of any doubt to that question. There is evidence to show that these four persons are not known to each other. According to the document, they have purchased this property jointly and sold the same jointly. As we have already held, the purpose of purchase and sale was for making profit. Theirs is not a partnership for the purpose of the Income-tax Act. If four strangers unite and produce profit by a joint venture otherwise than as partners, it would hardly be possible to say that they would not acquire the status of an association of persons. In view of that conclusion, we answer the second question also against the assessee and in favour of the Revenue. The two questions, referred, for the opinion of this court, are answered accordingly and the referred case is disposed of. No costs.