ORDER
1. This Reference has been made by the Tribunal to this Court seeking an answer or opinion on the following question:—
"Whether the Tribunal was right in holding that receipt of Rs.35 lakhs by the assessee in pursuance of the Consent Decree of the Hon'ble Bombay High Court was liable to tax as business income in view of the finding of the Tribunal that the transaction of purchase of land was in the nature of an adventure in trade and not as income in the nature of capital gains?"
2. It is apparent from the order of reference that the Tribunal was approached requesting that six questions stated to be of law require opinion of this Court. The Tribunal, further confined the reference to only one question which we have reproduced above.
3. We have heard the learned counsel for the Assessee, at whose instance, the question has been referred for opinion of this Court. The learned counsel submits that the Tribunal was justified in making a reference to this Court as a question of law squarely arises and for being answered by this Court. In his submission, the Tribunal was considering the matter in the case of an Assessee who entered into an agreement with Mrs. Jayaben D. Kenia on 12th January 1979 for purchase of a plot of land in village Dahisar, District Bombay, for a declared consideration of Rs.3,54,576/- and a sum of Rs.25,000/- was paid as earnest money. The possession of the land in question was, however, not made over to the assessee. The seller/ vendor entered into another agreement with a third party on 21st December, 1979 to develop the plot. When the Assessee became aware of the same, he filed the suit and applied for interim reliefs. The vendor, as also the third party, was party-defendant to the suit. The interim application was dismissed by a Single Judge and the Appeal against that order was also dismissed by the Division Bench. The Assessee approached the Hon'ble Supreme Court of India which set aside both orders and remanded the matter back to this Court. During the pendency of the proceedings, consent decree was passed in the suit itself and in pursuance of the same Rs.35,00,000/- was paid to the Assessee during the assessment year under consideration. He invested this amount in the units of the Unit Trust of India. He claimed before the Income Tax Officer that the surplus resulting in the receipt of Rs.35,00,000/- amounted to income chargeable to capital gains tax. However, the amount was not included in the total income in view of the investments made in the prescribed securities. The argument was that the agricultural land was agreed to be purchased and that is how the deal was struck, however, on payment of earnest money possession was never handed over. Thus, it is a capital investment in the property and the amount of Rs. 35,00,000/- received under the consent decree would be nothing but a payment to clear the nuisance on the said property. The contention was not accepted by the Income Tax Officer and he treated this sum as a receipt falling under Section 28(iv) of the I. T. Act and held it chargeable to tax. The First Appeal against this order was dismissed by the Commissioner of Income Tax where-from the Appeal was preferred before the Tribunal. In that Appeal, findings of fact was rendered by the Tribunal that the Assessee had embarked upon an adventure in the nature of trade. The receipt of the decreetal amount of Rs.35,00,000/- was nothing but an income from business, and hence, chargeable to tax. The receipt of decretal amount was not a capital gain.
4. We have found from a reading of this order and the order passed by the Tribunal in the main Appeal, copy of which is annexed and forms part of record of this reference, that pure findings of fact were rendered and in relation to the claim of the Assessee. The legal tests that were referred to in the main order are fairly well settled and as to how this income can be treated. We do not see how the question posed for our opinion can be termed as a question of law. It is only the applicability of tests and which are fairly well settled by numerous decisions in the field that was in issue. The Assessee may have urged that there is a question of law but the Tribunal having clearly held that the land was in Urban Agglomeration, non agricultural user of the land was permissible. The land falls within the prescribed area of the Urban Land Ceiling Act and a plan had also been sanctioned for the proposed housing scheme under Section 20 of the Urban Land (Ceiling and Regulation)Act, 1976.
5. In these circumstances and when the subsequent conduct of the Assessee is consistent with the intent in acquiring the rights in the property, then all the more the Income Tax Officer, as also the Commissioner and equally the Tribunal have not committed any error in holding that this was a sum or income chargeable to tax under Section 28(iv) of the I. T. Act. There was absolutely no question of law and which could arise for consideration and opinion in the given facts and circumstances.
6. We, therefore, find that this reference is entirely misconceived and requires no answer from us. It is, accordingly, disposed of.
RAHUL