KHOSLA J. - This matter has been referred to this Court by the Income-tax Appellate Tribunal upon a mandamus issued by us on the prayer of the assessee, Asu De.
The following question of law has been referred to us by the Tribunal :
'Whether the purchase and sale of the building sites by the assessee were a transaction in the nature of trade and consequently whether the excess realisation over cost in respect thereof was taxable profits in hands ?'
Mr. Rajagopal Sastri, who appeared on behalf of the Income-tax department, raised a preliminary objection that the question, as framed by the Tribunal, was not a question of law and should not be answered by us. He suggested a slight amendment which was agreed to by Mr. Avasthy and the amended question, which is admittedly a question of law, is now as follows :-
'Whether there was material on which the Tribunal could find that the purchase and sale of the building sites by the assessee were transaction in the nature of trade and consequently whether the excess realisation over cost in respect thereof was taxable profit in his hands ?'
The facts briefly are that the assessee, who is a salaried employee holding the post of Secretary to the Indian and Eastern Newspaper Society, bought two plots of land in Karol Bagh, Delhi, in 1942. He purchased these plots of a few years later at a profit. One plot was sold on 10th July, 1945, for Rs. 10,362 and the other on 8th January, 1946, for a sum of Rs. 10,263. These transactions therefore yielded a net gain of Rs. 11,396. The question arose whether the assessee was liable to pay income-tax on the amount of gain made by him. He did not originally include this sum in his assessment return, but when the matter came to the knowledge of the Income-tax officer he included it but immediately afterwards made a claim for exemption on the ground that the gain could not be treated as profit or gain of business. The Income-tax Officer decided against the assessee but the Appellate Assistant Commissioner upheld his objection on a number of grounds which have been set out very clearly in his order dated 10th September, 1948, printed on page 26 to 28 of the paper book. The Appellate Assistant Commissioner held that the assessee had bought these plots for the purpose of building houses, one for himself and one for his parents. Owing to a change in family circumstances he found himself unable to build these houses and in 1945 and early in 1946 he sold them. He also took into account the fact that a broker had offered four times the purchase price to the assessee but he refused to accept this offer because at that time he thought that he would be in a position to build the two houses. The department appealed against this order to the Tribunal and the Tribunal gave a finding adverse to the assessee. The Assessee then asked the Tribunal to state a case to this Court under section 66 of the Income-tax Act and when the Tribunal refused he move this Court for a writ of mandamus. This writ was granted and since Mr. Sikri, who appeared for the department, did not dispute that a question a of law did arise, the Court hearing the case passed a very brief order which is printed at page 8 of the paper book.
It is clear that an isolated instance of purchase and sale of land may amount to a trading venture and the profits accruing from such a transaction may well be liable to income-tax. It is not necessary that a person should enter into a series of transaction before he renders himself liable to pay income-tax. The question has to be determined in each particular case and the decision will depend upon the evidence produced by both parties. In the present case the contention before us is that was no evidence at all upon which the Tribunal could give the finding that the transaction was in the nature of trade and that therefore the profit arising from it was liable to income-tax. Mr. Sastri was anxious to obtain a ruling from us to this effect, but the legal position has been recognised to clearly in a number of cases that it is scarcely necessary for us to reiterate it, but if the wording of the question, as framed by the Tribunal, is liable to any misconstruction, I should like to make it quite clear that a single transaction of purchase and sale may in some cases amount to business or trade within the meaning of section 6 of the Income-tax Act. Therefore, merely because the assessee in this case bought two plots of land on one day and sold them later on two days will not be sufficient to grant the assessee exemption from income-tax in respect of the profits made by him. The matter will have to be considered further and the evidence led by him or by the department examined. It was for this reason that the question was amended at the suggestion of Mr. Sastri.
It is quite clearly a question of law whether in any particular case there is or is not sufficient evidence upon the basis of which the Tribunal could have come to a certain finding. If the finding of the Tribunal is based on no evidence whatsoever, then the Court upon the reference under section 66 of Income-tax Act will give its opinion to the effect that the finding is liable to be set aside because of total lack of evidence.
In the present case we find that there is no evidence whatsoever to show that the transaction was in the nature of a trading venture. There is, however indication to the contrary and it appears to me quite clear that the two plots of land were bought by the assessee with the sole object of building houses for his own benefit and for the benefit and for the benefit of his aged parents. He found himself unable to build upon these plots and was compelled to part with them. He was fortunate in getting a higher price than he had as such is not taxable.
The circumstances of this case must be looked into. The assessee is a salaried servant and he has not at any time launched out into ventures of trade. At the time he bought these plots he was living in a rented house and he has produced letters to show that his relations with his landlord were becoming strained and he was anxious to leave the rented house and build a house for himself. He bought two small plots only and at the time he bought them he could not have anticipated that the prices would go up. Indeed when the prices did go up a few years later he refused the offer which a broker had brought to him. Later on, however, he suffered domestic misfortune. Both his daughters became demented. Both of them had to be sent to a mental home, although one of them during her lucid moments was able to come home. In the circumstances, he thought it was not worth while building a house and he therefore, decided to sell his plots. There is not title of evidence to show that he intended to make a profit on Income-tax Tribunal are not based on any evidence whatsoever and they amount to no more than mere conjectures. I would, therefore, answer the question referred to us (as amended at the suggestion of Mr. Sastri) in the negative. The petitioner will also recover his costs in this Court which we assess at Rs. 100.
BHANDARI, C. J. - I agree.
Reference answered in the negative.