Law:

Section:

Section 28(i) of the Income-tax Act, 1961 [Corresponding to section 10(i) of the Indian Income-tax Act, 1922] - Business income - Chargeable as - In course of money lending business, assessee - HUF acquired certain agricultural lands from debtors - Subsequently, these lands were sold and amount realised was in excess of what assessee may be deemed to have paid for same at time of acquisition of lands - Agricultural expenses were incurred from cash balances of money lending business and surplus income from aforesaid lands went to swell money lending capital - Whether, on facts, agricultural land in question formed part of stock in trade of money lending business of assessee - Held, yes - Whether, therefore, excess amount realised from sale thereof was a taxable income - Held, yes FACTS The assessee-HUF carried on the business of money lending. In the course of the business, the assessee acquired certain agricultural lands from the debtors. After several years, the assessee sold the lands and as a result realised in excess of what the assessee had paid for the same at the time of acquisition of the lands. The Tribunal found that lands formed part of the stock in trade of the money lending business and the surplus amount realised was therefore liable to tax. On reference: HELD It was clear from the supplementary statement that the surplus of income of lands was never carried forward for the following year. The agricultural expenditure was incurred from the cash balances made up of money lending receipts as well as other receipts including the sale proceeds of agricultural produce. There was never any distinction made between the income and expenditure of the agricultural lands which had been sold in the accounting year and also the other lands which were with the assessee. It is always a question of fact whether the property purchased by a money-lender in discharge of loans advanced by him forms part of stock-in-trade of his business. That must depend upon whether, after purchase, he treated the properties as part of the stock-in-trade of the business by his acts, such as, including the value of the property in the account books, or charging the expenditure…

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