1. These three appeals are filed by the assessee and are directed against the orders of the Commissioner (Appeals). Since a common point is involved, they are disposed of by a consolidated order for the sake of convenience. S/Shri Shiv Lal, Inder Nath and Satnam Singh were partners of Moti Ram Ladha Ram, Delhi.
2. On 21-9-1970 they jointly purchased a sandy plot of land at Bhatinda, measuring 21,057 sq. yds., in equal shares. The land was partly sold on 12-3-1975. Further, sale to the tune of Rs. 2,09,875 was effected during the year under consideration. The ITO after careful consideration of the land transaction was of the view that the same was an adventure in the nature of trade. He, accordingly, treated the same as assessees' business income and equally assessed the profits at one-third of the sale proceeds after allowing the proportionate cost of land. On appeal before the Commissioner (Appeals), it was claimed that the sale of land was assessable as a capital gain as declared by the assessees. The Commissioner (Appeals), however, confirmed the order of the ITO assessing the profit from the sale of land as a business profit. The computation of the profit as worked out by the ITO was also confirmed on the basis of the decision of the Supreme Court in the case of P.M. Mohammed Meerakhan v. CIT  73 ITR 735. The assessees are still aggrieved and have come up in appeal before us.
3. The real question for our consideration is whether the profit realised from the transaction in question can be held to be income arising out of an adventure in the nature of trade. That means whether there are certain elements in the venture which in law would invest it with the character of a trade or business. The onus to prove the existence of these elements is undoubtedly on the department as held by the Supreme Court in the case of Saroj Kumar. Majumdar v. CIT 37 ITR 242. We, therefore, have to examine whether the inference drawn by the lower authorities that the transaction in question is a transaction in the nature of trade, is justified. To do this, it is not necessary to go into the details of every decision cited before us. As held by the Supreme Court in G. Venkataswami Naidu & Co. v. CIT 35 ITR 594, in each case it is the total effect of all relevant factors and circumstances that determine the character of the transaction.
4. The relevant facts as on our records are that, that the assessees, namely, S/Shri Shiv Lal, Inder Nath and Satnam Singh, are partners of Moti Ram Ladha Ram as well as other firms. The normal business of these firms in which the assessees are partners are in cotton or running of cotton mills or factories, etc. Admittedly, none of the firms are having any dealing in land. On 21-9-1970 they purchased a sandy plot of land at Bhatinda, measuring 21,057 sq. yds., in equal shares for a consideration of Rs. 1,08,000 from Modi Charitable Trust. Their respective capital accounts in the firms were adjusted for the purpose.
It was claimed before the ITO that the land was purchased with the intention to set up an industry or construction of a storage godown.
The assessees, however, stated that the plan was abandoned in view of the Indo-Pak war in 1971. The entire plot of land was carved out into different plots of various measurements. Certain portions were also set apart for roads, parks and open space. Out of 21,057 sq. yds. a total area of 15,793 sq. yds. was said to have been converted into saleable plots of land. The land was accordingly, disposed of in different lots as follows :Assessment year Area of land Nature of disposal1975-76 1,735 sq. yds.
Gifted1975-76 2,126 sq. yds.
Sold1977-78 1,575 sq. yds.
Gifted1977-78 6,015 sq. yds.
Sold1980-81 761 1/2sq. yds.
Sold 5. Shri Sunil Vasudeva, the learned counsel of the assessee, and Shri Kulwant Singh, the learned departmental representative, were heard at lengths. The arguments of the learned counsel of the assessee proceeded on the same lines as advanced before the Commissioner Appeas). Emphasis was, however, laid on the facts that the transaction was an isolatated one ; the purchases was made out of the respective capitals of the assessees ; and the land was parcelled out in plots by making demarcations for roads, lanes, parks and open space but no improvement was made on the land, Since facts of the present case are entirely distinguishable from the cases relied upon by the Commissioner (Appeals), namely, CIT v. Jawahar. Development Association [1981 12 ITR 431 (MP), Raja J. Rameshwar Rao v. CIT  42 ITR 179 (SC) and P.N.Mohd. Meerakhan (supra), his order is liable to be cancelled and relief be allowed as per the claim of the assessee which is squarely covered by the decision of the Supreme Court in Janki Ram Bahadur Ram v. CIT  57 ITR 21 and that of the Allahabad High Court in the case of Deep Chandra & Co. v. CIT  107 ITR 716 and that of the Madras High Court in the case of CIT v. S.S. Thiagarajan  129 ITR 115.
On the other hand, Shri Kulwant Singh, the learned departmental representative, relied on the orders of the Commissioner (Appeals).
According to him the purchase was made by the assessees with the intention to re-sell later at a profit. The assessees could not make out any case in support of the claim made by them and as such, the orders of the Commissioner (Appeals) as supported by the case-laws cited by him are liable to be upheld.6. We have carefully considered the rival submissions. It is a fact that the land was a sandy patch with no possibility of cultivation and no income was derived therefrom. It is also seen that the purchase was made out of the respective capital of the partners. Admittedly, no industry was set up or storage godown was constructed on the land.
Neither any efforts appear to have been made to meet that end. The abandonment of the project was said to be due to the Indo-Pak war. It is also established that a fertilizer plant was set up by the Government of India in the vicinity and at the same time a military base was also set up in the adjoining land. From these facts it is necessary to find out what was the real objective of the assessees in acquiring this land and whether such acquisition amounts to an adventure in the nature of trade. The Supreme Court in the case of Janki Ram (supra) elaborately discussed the factors to be taken into account while arriving at such an inference. It has clearly indicated that a single factor is not conclusive to make an inference. The mere fact that the assessee made a profitable bargain when it purchased the property and that it had desired to sell the property if a favourable offer was forthcoming could not without other circumstances justify an inference that the assessee intended by purchasing the property to start a venure in the nature of trade. The Supreme Court further held that it was for the revenue to establish that the profit earned in a transaction was within the taxing provisions. The nature of the transaction should be determined by a consideration of all the facts and circumstances which were brought on the record of the income-tax authorities. But a transaction of purchase of land cannot be assumed without more to be a venture in the nature of trade. The profit motive in entering a transaction is not decisive, for an accretion to capital does not become taxable income merely because an asset was acquired in the expectation that it may be sold at a profit. Similarly the Allahabad High Court in the case of Deep Chandra (supra) held that land was not a commercial commodity. Land alone was also not a trade in itself. An investment in purchasing a property was also made with a view to earning return on the sum invested. Therefore, the mere fact that a person invested money for the purpose of re-selling whenever a suitable opportunity arises did not give a sufficient ground to hold that the transaction was in the nature of trade. The Madras High Court in the case of Thyagarajan (supra) considered a case of solitary transaction entered into by the assessee and it was held : ...The assessee had entered into a solitary transaction for the acquisition of the plots of land and sold them after four years. He had not purchased any such immovable property at any time before or after. He had also not developed even the plots which he purchased.
He had only divided the same and sold as smaller extents and the development of the plots, such as laying of roads, etc., were done by the assessee's vendors . . . Held, on the facts, that the Tribunal was right in its view that the transaction in question was not an adventure in the nature of trade. (p. 11.6) 7. Applying the ratio of the decisions above on the facts of the present case, we are of the view that the revenue has not brought on record, any material evidence to show that the transaction in question is in the nature of an adventure in the nature of trade. The assessees in this case were not averse to re-selling the property if suitable offer came and if it fetched good price. After a lapse of 4/5 years, the assessees got a good offer and accordingly, disposed of the land in plots to yield maximum profit. But there is no evidence to show that they started dealing in land, except disposal of this particular plot of land already purchased. The mere fact that the land was parcelled out into suitable residential plots and demarcation of areas for roads, lanes and parks would not in itself amount to development of the land.
No other land was purchased either singly or jointly by the assessee afterwards. Considering all these facts and the cumulative effect, we are of the view that the said transaction cannot be said to be an adventure in the nature of trade. The orders of the lower authorities are, accordingly, reversed and the appeals of the assessees on this point are allowed.
8. "The decision of the Supreme Court in the case of Raja Jai Rameshwar Rao (supra) relied upon by the learned Commissioner (Appeals) is distinguishable on facts as the assessees were not found to have made any development of the land in the present case. With regard to the decision of the Madras High Court in the case of Jawahar Development (supra) relied upon by the Commissioner (Appeals), it is seen that the assessee in that case not only purchased the plot of land but formed a real estate firm by executing the partnership deed and also filed the return of income showing profit from the sale as income from business.
The facts are clearly distinguishable from that of the assessees presently before us.
9. The ITO is. accordingly, directed to assess the said amount as capital gains in the respective hands of the three assessees. The appeals are allowed.