Law:

Section:

Section 28(i) of the Income-tax Act, 1961 [Corresponding to section 10(1) of the Indian Income-tax Act, 1922] - Business income - Chargeable as - Assessment years 1959-60 to 1961-62 - Assessee formed a partnership with three other persons - Object of partnership was to purchase two sites, convert them into smaller building sites and then effect sales thereof - Two sites were converted into seventy four building sites out of which fifty seven were sold - Thereupon, partnership was dissolved - Out of balance 17 sites, one was given to charity and remaining 16 were divided between four partners - Assessee sold four sites that fell to his share - Whether profits earned on sale of said four sites could not be regarded as revenue profits chargeable to tax - Held, yes FACTS The assessee, along with three others, agreed to carry on business on the terms and conditions contained in the deed and, in pursuance thereof, purchased on 20-1-1949, in their joint names two sites. The object was to convert those sites into smaller building sites and effect sales thereof. Those two sites were converted into seventy-four building sites out of which fifty-seven were sold up to June, 1956. On 6-6-1956, the partnership was dissolved. One of the 17 sites was given to charity. The remaining 16 sites were divided between the four partners, and each of the partners got four sites. Thereafter, the assessee sold the sites that fell to his share. The assessee contended that profits on sale of said sites were capital profits. The ITO was of the view that the very idea in dealing with the plots was to purchase and sell them and to carry on a regular business thereof. He, therefore, treated the profits as revenue profits in the assessment years 1959-60 to 1961-62, respectively, which was confirmed by the AAC and the Tribunal. On reference : HELD It was not the case of the revenue that after the dissolution of the partnership, the assessee had purchased any other sites or sold any sites other than those that fell to his share at the time of the dissolution of the partnership. From the mere fact that he sold the sites that fell to his share no inference could be drawn that he wanted to continue…

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