K.N. Seth, J.
1. At the instance of the department, the Income-tax Appellate Tribunal, Allahabad Bench, has referred the following question for the opinion of this court:
'Whether, on the facts and in the circumstances of the case, the capital gains ought to have been computed on the basis of transactionsspread over a period of 27 years in question or on the basis of transactions occurring in each assessment year ?'
2. The assessee is an HUF. It was following two different accounting years, i.e., the calendar year for business and the financial year for property. The proceedings relate to the assessment year 1969-70. The dispute relates only to the capital gains in respect of sale of land at Amritsar.
3. The assessee purchased land measuring 28,278 square yards during the period 1942-1947 for a sum of Rs. 1,66,273. A sum of Rs. 81,000 was spent on improvement raising the total cost of land to Rs. 2,47,723. The assessee showed a capital gain of Rs. 30 only in the return of income for the assessment year in question. The ITO, while determining the capital gains, took into account only the sale of plots measuring 5,673 square yards for Rs. 1,05,700 during the previous year relevant to the assessment year and after working out the proportionate cost held that there was a capital 'gain of Rs. 55,670. On appeal by the assessee, the AAC came to the conclusion that the capital gain computed by the ITO could not be sustained. The department went up in appeal to the Tribunal. The Tribunal upheld the decision of the AAC principally on the reasoning that the land purchased during the period 1942 to 1947 was developed as a single unit; that the assessee sold plots spread over a long period and still retained a considerable parcel of the land. The Tribunal also took into account the fact that in earlier years the assessee's stand that loss or gain on the sale of the property would be considered when the entire plots of land were sold had been impliedly accepted by the department. In the opinion of the Tribunal, the principle adopted by the ITO by working out the cost of the land per square yard and determining the profits after adjusting it against the sale of each plot was unwarranted.
4. In the present case although land was purchased in different lots during the period 1942 to 1947 the entire land was combined into one unit and developed as such under one scheme. The expenses incurred on the development and layout of the plots was for the whole unit and no part of it could be appropriated to a particular plot. Unless the entire transaction of sale was complete, the profit or loss earned on the venture could not be correctly determined. This view finds support from the decision in K.H. Mody's case : 8ITR179(Bom) . In that case also land purchased was developed and divided into building sites. Some plots were sold during the assessment year and some later on. The I.T. authorities determined the profit earned on the sale of plots during the assessment year in question. Beaumont C.J. observed (p. 185) :
'It is to be noted that the whole transaction is not yet complete, which distinguishes this case from the various other cases which have been cited in which there has been a purchase of property or goods and a subsequent sale and the courts held that the transaction amounted to carrying on business. But we are not referred to any case in which only a part of the property had been sold whilst the rest remained in the hands of the assessee and might result in a profit or might result in a loss.'
5. Kania J. observed as follows (p. 186):
'The cases to which our attention has been drawn show that when there is a single venture, i.e., a single transaction which is treated as having been entered into in the nature of trade, the question of assessing the profits arose when the venture came to an end, i.e., when the goods purchased were all sold. It is admitted here that about three-fourths of the area originally purchased is still there. Under the circumstances it is not possible for the court to state on the materials put before us whether there is any profit......'
6. In CIT v. A.K. A.R. Family  9 ITR 347 , an HUF carrying on a money-lending business took over certain acres of lands and a house in settlement of a debt due to it. The lands were sold at different times. The assessee, who maintained an account of these sales claimed in the accounting year when the last sale took place a certain sum as loss on the whole transaction. The I.T. authorities held that in each year in which a sale of a part of the property took place the assessee ought to have made an estimate of his loss on that particular sale and ought to have claimed the loss estimated to have been incurred on that particular sale in the accounting year in which it took place. It was held that until the transaction had been completed, it could not be known what the loss would be and, therefore, the assessee was entitled to claim the loss suffered in the accounting year when the last sale took place. It was observed that when only a part of the property has been sold, and the rest remains in the hands of the assessee, and might result in a profit or might result in a loss, and the whole transaction is not yet complete, no assessment can be made.
7. On behalf of the department reliance was sought to be placed on the decision of this court in Lalit Ram Mangilal of Cawnpore v. CIT : 18ITR286(All) . In that case, the assessee carrying on business in cloth purchased 8 bars of gold between 29th October, 1942, and 6th November, 1942. He sold three of the bars on 27th April, 1943, at a higher rate and utilised two of them in making ornaments for the marriage of his daughter in July, 1943. On 22nd October, 1944, the assessee sold the remaining three bars. In making the assessment for the accounting year ending June, 1943, the question was raised whether the assessee's transaction in gold was an adventure in the nature of trade and the profit made on the sale of the three gold bars in April, 1943, was assessable to income-tax. The I.T. authorities held that the profit was assessable to income-tax. This court held that, in the circumstances of the case, the profits from the sale of thethree gold bars had not been proved to have arisen from 'an adventure in the nature of trade'. It was also observed that the proposition that whenever goods are purchased in bulk, so long as the whole lot has not been sold, profits cannot be ascertained and the income does not become taxable, as a general statement of law, is not correct. That case is clearly distinguishable on facts. In that case, a clear finding had been recorded by the Tribunal that the purchase of eight gold bars did not constitute only one transaction and consequently it could not be said that the eight gold bars constituted only one unit and, therefore, the profits could not be ascertained unless the whole unit had been disposed of. It was also noticed that the assessee had kept an account of these gold bars in his account books in the same manner in which he was keeping an account of the stock of cloth in which he was trading. It was on these facts and circumstances that the decisions, In re K.H. Mody : 8ITR179(Bom) and CIT v. A.K. A.R. Family  9 ITR 347 , were distinguished.
8. Reliance for the department was also, placed on the decision of the Supreme Court in P.M. Mohamed Meerakhan v. CIT : 73ITR735(SC) . The decision in that case is also clearly distinguishable. In that case 22 plots out of the entire tract of land consisting of 23 plots were sold out and one was retained by the assessee. In these circumstances, it was possible for the ITO to work out the profits because all the plots except one had really been sold during the previous year relevant to the assessment year in which the capital gain was worked out.
9. The decision of the Andhra Pradesh High Court in CIT v. Nanduri Suryanarayana : 46ITR894(AP) is also of not much assistance to the revenue. In that case, the assessee-firm purchased a piece of land measuring 9.23 acres for Rs. 20,000. The land was parcelled out into 31 plots. In the very first year the entire sum of Rs. 20,000., that was invested for the purchase of the land, was realised and the transaction ended in a profit. During the subsequent years, further plots were sold and profits realised. In the proceedings for the assessment year 1945-46 the stand taken by the department was that the entire profit should be treated as having accrued during the previous year ending March 31, 1945, when the sale of sites was completed and the transaction came to an end. The assessee contended that it was only the profit that was realised during the previous year that should be taken into account. It was observed that there may be a case in which the capital value has been realised and the profits were capable of ascertainment, as in that case, even before the determination of the venture. On the facts of that case, it was clear that during the very first year the assessee had realised the entire sum expended for the purchase of the land and made a profit and as such it was not a case in which it was not possible to determine the profits during thevarious years the plots were sold. In our case, the situation is entirely different. The total cost of the land to the assesses was Rs. 2,47,723 including the amount spent on its development. Only a part of the land had been sold during the relevant year for Rs. 1,05,700. In such a situation, it is obvious that by sale of some of the plots only a part of the investment had been realised and consequently there could be no question of earning any profit. The principle adopted by the ITO of working out the proportionate cost of the plots sold and determining the amount of the capital gain could not be justified. The view taken by the Tribunal appears to be sound and must be upheld.
10. In the result, our answer to the question referred is against the department and in favour of the assessee. The assessee will be entitled to costs which are assessed at Rs. 250.