(Appeal by special leave from the judgment and order, dated August 25, 1976, of the Andhra Pradesh High Court in R.C. No.24 of 1975).

Income-tax----

----Business---Adventure in the nature of trade---Tests---Two ladies purchasing land, carving them into four plots and selling them within a few months after purchase---Transaction adventure in the nature of trade---Assessment as association of persons upheld.

The appellants were the wives of two brothers who were partners in a firm: In December 1963, they purchased a piece of land for a consideration of Rs.10,620 and shortly after purchase they carved it into four plots and sold there individually. Two agreements were entered into, one in May, 1964, and the other in July, 1964, and the sale-deeds were executed in pursuance thereof on October 9, 1964, and November 13, 1964:

Held, on the facts, that the transaction of the appellants was an adventure in the nature of trade and that the profit derived therefrom was liable to income-tax and assessment could be made on them in the status of an association of persons.

Decision of the Andhra Pradesh High Court affirmed.

Suruchi Aggarwal, Bharati Reddy, Pramila and T.V.S.N. Chari, Advocates for Appellants.

S.C. Manchanda, Senior Advocate (K.P. Bhatnagar and P. Parameswaran, Advocates with him) for Respondent.

JUDGMENT

The assessees arc the appellants. They are aggrieved by the judgment of the Andhra Pradesh High Court answering the questions referred to it under section 256(1) of the Income Tax Act, at the instance of the Revenue, against them. The two questions referred read as follows:

"(1) Whether, on the facts and in the circumstances of the case, the profits of Rs.41,666 derived by the assessee were from an adventure in the nature of trade?

(2) If the answer to the above question is in the affirmative, whether the assessment could be made in the status of an association of persons?"

The assessees are the wives of two brothers, -who are partners in a firm. In December, 1963, the assessees purchased a piece of land measuring 8,479 sq. yards in the Banjara Hills Armed of Hyderabad, for a consideration of Rs.10,620. They say, they raised the purchase money by selling their silver to the partnership firm of which their respective husbands are partners. The firm deals in bullion. Shortly after purchasing the land, they carved it into four plots and sold them individually. Two agreements of sale were entered into, one in May, 1964, and the other in July, 1964, and sale deeds were executed in pursuance thereof on October 9, 1964, and November 13, 1964. The total consideration received under the sale-deeds was Rs.52,285. The Income Tax Officer brought the difference amount to tax treating the transaction as an adventure in the nature of trade. The assessees questioned the same by way of an appeal before tile Appellate Assistant Commissioner. It was dismissed. The matter was then carried in further appeal to the Tribunal. The Tribunal allowed the appeal holding that the intention of the assessees while purchasing the said land was to make an investment and that they had no intention of reselling the same. It observed that, having regard to the background of the assessees, the transaction cannot be held to be an adventure in the nature of trade. On a reference, the High Court came to a contrary conclusion. According to the High Court, the fact that, soon after the purchase of the land, the assessees carved it into plots and sold them within a few months, coupled with the other facts and circumstances of the case, establishes that the intention of the assessees, even when they purchased the land, was to resell the same and not to make an investment. It is the said conclusion which is questioned before us.

On the facts found, we cannot say that the High Court was in error in coming to the conclusion it did. On the other hand, the Tribunal seems to have made certain assumptions while coming to the conclusion in favour of the assessees, which were not really warranted. The Tribunal refers to the "background of the ladies" as one of the circumstances inducing it to come to the conclusion in favour of the assessees but it has not taken care to elucidate what that background was. The fact that soon after the purchase, the assessees carved out the land into plots and sold them within a few months, coupled with the other circumstances of the case, is consistent more with the theory of adventure in the nature of trade than with the other theory accepted by the Tribunal.

We are, therefore, unable to see any ground for interference in this appeal. It is, accordingly, dismissed. There will be no order as to costs.

M.B.A./2302/T Appeal dismissed.