Law:

Section:

Section 5 of the Income-tax Act, 1961 (corresponding to section 4 of the Indian Income-tax Act, 1922) - Income - Accrual of - Assessment year 1951-52 - By agreement dated 5-5-1946, assessee agreed to sell housing society land held by him absolutely for certain amount and if society desired, he undertook to give society on lease his rights on land for three years with covenant to purchase on society paying him Rs. 60,000 at time of executing lease deed out of sale price of land - Said agreement also recited that assessee would at time of executing sale deed account and give a set off of Rs. 60,000 paid as earnest money out of sale price and if housing society failed to get sale deed executed of rights of assessee during period of lease on payment of remaining consideration, then amount of Rs. 60,000 paid by society as "earnest money" would stand forfeited - Accordinlgy, assessee received Rs. 60,000 in 1946 and executed conveyance in favour of society in 1950 conveying land to society for agreed sale price - Whether in view of recitals in agreement it was clear that amount of Rs. 60,000 paid in 1946 was intended to be earnest money and not part payment of sale price - Held, yes - Whether, therefore, profit made by assessee in sale transaction was taxable in assessment year 1951-52 and was not liable to be apportioned as income for assessment years 1946-47 and 1951-52 - Held, yes FACTS The assessee derived income from house property and a share in a partnership and from interest and dividends. On 8-10-1938, the assessee purchased the leasehold interest in a plot from one 'B' who had obtained a lease from the original owner of the land on 26-9-1938. Under the lease B had a right to purchase the land, and that right was also assigned to the assessee. On 14-9-1945 the assessee purchased a half share in the reversion from the original owner, and on 5-5-1946, he entered into an agreement with a housing society for sale of his rights in the land and obtained Rs. 60,000 as earnest money. Under another conveyance, dated 24-9-1947, the assessee purchased, from the original owner of the land his right of reversion in the remaining half share. On 1-10-1947, the society…

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