The sale of property does not constitute business income if acquired primarily as an investment without the intention to engage in trade.

1. This reference under S.256(1) of the Income - tax Act, 1961, hereafter referred to as "the Act", has been made by the Income - tax Tribunal, Delhi Bench "A", at the instance of the Commissioner of Income - tax and relates to the assessment proceedings against Messrs. Raunaq Singh Swaran Singh, a Hindu undivided family, hereafter referred to as "the assessee", relating to the assessment year 1962-63. The previous year of the assessee ended on August 31, 1961.

2. Facts leading to the reference, stated briefly, are that the assessee - family owned a building at Uttariya Marg, New Delhi, and resided in part of it while its remaining portion was in the occupation of tenants. On January 9, 1959, it purchased one plot of land bearing No. C - 28, Defence Colony, New Delhi, for Rs. 9,465. On January 18, 1959, it purchased another plot bearing No. C - 215 also in Defence Colony for Rs. 9,250. On April 8, 1961, the first plot was sold by it for Rs. 27,000 and on June 9, 1961, it sold the second plot also for Rs. 27,000 thereby earning a substantial profit. During the assessment for the year 196263 the assessee contended before the Income - tax Officer that this profit was a capital gain. The Income - tax Officer repelled this contention and held that this profit amounting to Rs. 35,319 was business profit earned by "adventure in the nature of a trade". The amount was, therefore, added to the income of the assessee and assessment was framed accordingly. Aggrieved by this, the assessee filed an appeal before the Appellate Assistant Commissioner but the same was dismissed. In second appeal before the Tribunal, however, the contention of the assessee was accepted and the Tribunal held that the plots had been purchased in the course of investment and the profits realised on their sale was not an income from business. At the instance of the Commissioner, the Tribunal has now referred the following question for decision of the court:
"Whether, on the facts and in the circumstances of the case, the excess price realized by the assessee on the sale of the two plots in Defence Colony / New Delhi, was its income from business?"

3. It is mentioned in the statement of case that according to the findings arrived at by the Tribunal on February 26, 1959, the assessee had purchased one other plot bearing No. 10/64, situated at Najafgarh Industrial Area for Rs. 32,405. On this plot the assessee constructed a building which was leased out by it on a monthly rent of Rs. 3,750 and that in addition to the above plots it also had one other plot bearing No. C / 9, Rohtak Road, purchased before 1957 for Rs. 3,547 which it still retained at the relevant time. The two plots in Defence Colony and the plot at Najafgarh Industrial Area are stated in the statement of case to have been purchased by the assessee by raising loans from the firm of Messrs. Raunaq Singh and Co. which the Tribunal has found was a firm constituted exclusively by members of the assessee - family. The Tribunal has also found that the assessee - family was making tremendous progress in business and wanted to acquire status and stability by making permanent investment in immovable properties and by building up a permanent source of property income. The Tribunal further found that investment in land was not the line of business of the assessee - family and that investments in purchasing the two plots were, relatively speaking, very small. It also rejected the possibility of the assessee choosing to invest