Law:

Section:

Income-tax---Capital or revenue loss--Assessee, a private limited company, carrying on business as a contractor, purchased two pieces of land for supply of earth--Assessee sold said land at a loss after expiry of contract of supply of earth--Such pieces of land shown as fixed assets in his balance-sheet by assessee--Loss sustained by assessee by sale of land, held, was a capital loss. JUDGMENT R.S. PATHAK, J.--This appeal by special leave is directed against the judgment of the High Court of Orissa disposing of an income-tax reference and answering the following question in favour of the Revenue and against the assessee: "Whether, on the facts and in the circumstances of the case, the loss of Rs.30,045 claimed by the assessee is a capital loss or a revenue loss?" The assessee is a private limited company carrying on business as a contractor. In April 1964, it entered into a contract with the South Eastern Railway Administration for the execution of earth work, bridge work and other miscellaneous works required for the construction of a new railway yard. As it was required to supply earth outside the railway land, the assessee found it expedient to buy two pieces of land from which earth could be excavated and conveniently taken to the work site. One piece of land was acquired at a cost of Rs.53,196 during the calendar year 1964 corresponding to the assessment year 1965-66, and the other piece of land was acquired for Rs.15,045 during the calendar year pertaining to the assessment year 1966-67, bringing the total cost to Rs.68,241. Soon after the work was over, the assessee sold both lands for a sum of Rs.23,000 thereby sustaining a loss of Rs.45,241. The assessee treated this as the value of the excavated earth and apportioned the amount in its accounts in the following manner, Rs.8,196 as the cost of the earth for the assessment year 1965-66, Rs.30,045 towards the earth excavated in the assessment year 1966-67 and Rs.7,000 towards the earth excavated for the assessment year 1967-68. The Income Tax Officer accepted the claim for the assessment year 1965-66. The claim of the assessee to a deduction of Rs.30,045 for the assessment year 1966-67 was disallowed on…

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