JUDGMENT Tatachari, J.
1. In this reference, the Income-tax Appellate Tribunal, Delhi Bench ' B ', has referred two questions of law, namely :
" t. Was the profit arising from the sale of lands liable to income-tax on the ground that the transactions in the lands were in the nature of business transactions ?
2. Was the order of the Tribunal vitiated because the Members did nto refer their difference of opinion (as to the intention at the time of purchase) to a third Member ? "
2. The facts which have given rise to the aforesaid two questions of law may be set out briefly. The assessed, A. N. Seth, is an individual, and the assessment years are 1949-50 and 1950-51, and the corresponding previous years are the years ending with March 31, 1949, and March 31, 1950. Prior to the partition of India, the assessed was a resident of Lahore. In the year 1938, the assessed along with his father-in-law, Shri A. N. Mehra, formed a partnership under the name and style of M/s. Sonepat Electric Supply, hereafter referred to as " the firm ". The firm obtained an electric license from tha Government of Punjab to generate electricity and supply it to Sonepat town. For that purpose, the firm obtained a piece of land measuring 20 bighas and 15 biswas on lease from the Sonepat Municipality on April 9, 1938, for a term of 18 years, on a rent of Rs. 100 per annum. The firm constructed a power house on a portion of the leased land and installed electrical equipment for generating electricity.
3. On January 18, 1940, a limited company under the name and style of M/s. Sonepat Light, Power and General Mills Limited, hereafter referred to as "the company", was floated, and the assessed became its managing director. On October 24, 1940, the firm took on lease antoher piece of land measuring 27 bighas, 10 biswas, which was adjacent to the previous piece of land from the Sonepat Municipality for a terra of 18 years and on a rent of Rs. 50 per annum. On January 19, 1941, the Registrar of Joint Stock Companies granted a certificate of commencement of business to the company. On January 30, 1941, the firm transferred the entire electric undertaking including the machinery and equipment together with all toher assets to the company. After the said transfer, the firm sought for permission to transfer the electric license also to the company, but the Government of Punjab refused to grant the permission. Thereupon, the entire assets were retransferred by the company to the firm some time in 1943, but with retrospective effect from April 30, 1942, which was apparently the date on which the permission was refused by the Government of Punjab. It appears that after further negtoiations, the Government of Punjab ultimately granted the permission for the transfer of the license, and, therefore, on March 22, 1944, the assets of the electricity undertaking were transferred again by the firm to the company. It may be stated here that some time in 1942, the company expanded its activities, and an oil mill, a ginning factory and an ice factory began to function as part of the business activities of the limited company.
4. In 1945, Shri A. N. Mehra, the father-in-law of the assessed, left the partnership, and thus the assessed became the sole proprietor of the business of the firm. On September 13, 1946, the entire land, measuring 48 bighas and 5 biswas, was sold by the municipality to the assessed for a sum of Rs. 3,015. According to the assessed, though the sale deed was executed on September, 13, 1946, the negtoiations for the purchase were going on for a long time commencing from March, 1941. After the said purchase, the assessed gto the land surveyed, gto prepared the lay-out plan, and parceled out the land into pltos. The lay-out plan, which was gto prepared by the assessed, was approved by the municipality on June 23, 1948. The assessed developed the area and sold the land in pltos. In the relevant previous years, with which the present reference is concerned, viz., the years ended March 31, 1949, and March 31, 1950, the assessed sold such pltos to about 88 parties and the sale consideration received by him ttoalled Rs. 60,292. A portion of the said area was sold to the company for a consideration of about Rs. 16,150.
5. The Income-tax Officer worked out the surplus profit realised by the assessed in the sale transactions during the aforesaid two years as Rs. 25,600 and Rs. 34,692. Out of these amounts, he deducted Rs. 1,000 in each of the two years as cost of land and certain operation schemes, levelling, etc. the balance amounts were treated by the Income-tax Officer as surplus profit, and assessed to income-tax.
6. The assessed preferred two appeals to the Appellate Assistant Commissioner of Income-tax against the two assessment orders, and contended that the surplus amounts realised by him in the sale transactions were only accretions to the capital, and could nto be taxed as income from business or toher sources. By his common order, dated November 25, 1958, the Appellate Assistant Commissioner held on a consideration of the facts and circumstances of the case that the crucial fact which must be established in order to tax the excess in btoh the years was whether the purchase of the land was made with an intention to re-sell, and that the facts and circumstances in the case proved that the intention of the assessed at the time of purchase was merely to purchase the land as a capital asset and there could nto be any intention to re-sell the same at that time, that even if the assessed had started developing the land for purposes of sale, the said subsequent mtoive in selling the land was nto of any consequence, and that, therefore, the amounts were only a capital gain. In that view, he accepted the contention of the assessed and deleted the said amounts from the taxable income of the assessed.
7. Against the said common order, two appeals were preferred by the income-tax authorities to the Income-tax Appellate Tribunal, Delhi Bench 'B'. The Tribunal consisted of one Judicial Member and one Accountant Member. The learned Judicial Member took the view that even at the time of purchase, the intention of the assessed was to sell the land at profit. On the toher hand, the Accountant Member took the view that the intention of the assessed at the time of purchasing the land was nto to sell it at a profit, but the intention was only to exploit the land for the promtoion of the activity of electrical undertaking and the subsequent expansion of the same. But, btoh the Members agreed that the intention of the assessed at the time of the sale of the pltos was to sell the land with a view to earn profits, and that, in the circumstances, the gains were liable to be taxed as revenue income. In the result, the Tribunal allowed the appeals, set aside the common order of the Appellate Assistant Commissioner, and upheld the decision of the Income-tax Officer that the profits arising from the sale of the pltos were liable to income-tax.
8. Thereupon, the assessed moved the Tribunal by two reference applications to refer to this court the two questions which have already been set out above under Section 66(1) of the Income-tax Act, 1922. As the questions of law were common to the two reference applications, the Tribunal consolidated them and made this single reference.
9. The first question for consideration is as to whether the sales of the pltos of lands by the assessed were in the nature of trade or business, and the surplus profit realised by him is liable to income-tax. As stated above, the Appellate Assistant Commissioner considered that the crucial fact which must be established in order to tax the surplus profit was whether the purchase of the land was made by the assessed with an intention to re-sell for profit, and on the facts and circumstances of the case, he came to the conclusion that the assessed did nto have that initial intention, and any subsequent mtoive to sell the land for profit was nto of any consequence, and that, therefore, the amounts in question were only a capital gain nto liable to income-tax. The said view was obviously incorrect, as it is now well settled by the decisions of the Supreme Court that the matter does nto rest merely on the initial intention of the assessed at the time of the purchase, but his entire conduct from the moment of acquisition to the moment of the sale has to be taken into consideration. In G. Venkataswami Naidu & Co. v. Commissioner of Income-tax, [1959] 35 I.T.R. 594, 607 ; [1959] Supp. 1 S.C.R. 646 the Supreme Court observed regarding the question as to whether a transaction is in the nature of trade or business, as follows :
" This question has been the subject-matter of several judicial decisions; and in dealing with it all the judges appear to be agreed that no principle can be evolved which would govern the decision of all cases in which the character of the impugned transaction falls to be considered. "
10. Similarly, in Khan Bahadur Ahmad Alladin and Sons v. Commissioner of Income-tax, the Supreme Court observed as follows :
" The answer to the question whether a transaction is an adventure in the nature of trade does nto depend upon the application of any abstract rule, principle or formula, but must necessarily depend in each case on the ttoal impression and effect of all the relevant factors and circumstances proved therein and which determine the character of the transaction. "
11. In Janki Ram Bahadur Ram v. Commissioner of Income-tax, the Supreme Court observed as follows :
" No useful purpose would be served by entering upon a detailed analysis and review of the observations made (in various decisions) in the light of the relevant facts, for no single fact has decisive significance, and the question whether a transaction is an adventure in the nature trade must depend upon the collective effect of all the relevant materials Drought on the record. But general criteria indicating that certain facts have dominant significance in the context of toher facts have been adopted in the decided cases."
12. As regards the initial intention of the assessed at the time of the purchase and his subsequent mtoive for selling the- land at a profit, the Supreme Court in G. Venkataswami Naidu & Co. v. Commissioner of Income-tax, observed at page 610 as follows :
" It is often said that a transaction of purchase followed by re-sale can either be an investment or an adventure in the nature of trade. There is no middle course and no half way house. This statement may be broadly true; and so some judicial decisions apply the test of the initial intention to re-sell in distinguishing adventures in the nature of trade from transactions of investment. Even in the application of this test, distinction will have to be made between initial intention to re-sell at a profit which is present but nto dominant or sole; in toher words, cases do often arise where the purchaser may be willing and may intend to sell the property purchased at profit, but he would also intend and be willing to hold and enjoy it if a really high price is nto offered. The intention to re-sell may in such cases be coupled with the intention to hold the property. Cases may, however, arise where the purchase has been made solely and exclusively with the intention to resell at a profit and the purchaser has no intention of holding the property for himself or toherwise enjoying or using it. The presence of such an intention is no doubt a relevant factor and unless it is offset by the presence of toher factors it would raise a strong presumption that the transaction is an adventure in the nature of trade. Even so, the presumption is nto conclusive ; and it is conceivable that, on considering all the facts and circumstances in the case, the court may, despite the said initial intention, be inclined to hold that the transaction was nto an adventure in the nature of trade. We thus come back to the same position and that is that the decision about the character of a transaction in the context cannto be based solely on the application of any abstract rule, principle or test and must in every case depend upon all the relevant facts and circumstances."
13. We shall, therefore, consider the facts and circumstances in the present case, keeping in view the above-mentioned principles laid down by the Supreme Court. The assessed, along with his father-in-law, Shri A.N. Mehra formed the partnership firm in 1938, and obtained an electric license from the Government of Punjab to generate electricity and supply it to Sonepat Town. On April 9, 1938, the firm obtained a piece of land measuring 20 bighas and 15 biswas on lease from the Sonepat Municipality and constructed a power house on a portion of the leased land and installed electrical equipment for generating electricity. The obtaining of the piece of land on lease was obviously for the purpose of supporting the electrical undertaking. Then, on January 18, 1940, a limited company was floated, and the assessed became its managing director. On January 19, 1940, the firm took on lease antoher piece of land measuring 27 bighas, 10 biswas. On January 19, 1941 the Registrar of Joint Stock Companies granted the necessary certificate for the commencement of the business of the limited company. Within a few days thereafter, on January 30, 1941, the firm transferred the entire electrical undertaking including the machinery and equipment together with all toher assets to the limited company. The firm also sought for permission to transfer the electric license also to the limited company, but the Government of Punjab refused to grant the permission. Thereupon, the entire assets were re-transferred by the company to the firm with effect from April 30, 1941. The short time within which the above transactions took place do lead to the inference that the firm, some time after the floatation of the limited company, formed the idea of transferring its assets to the limited company, and with that in view obtained the additional land of 27 bighas and 10 biswas with the indention of transferring that land also in favor of the limited company. This is further probabilised by the transactions which took place subsequently. After the refusal by the Government of Punjab to permit the transfer of the license, the assessed appears to have continued the negtoiations with the Government of Punjab, and succeeded in getting the said permission. As soon as the permission was granted, the assets of the electricity undertaking were again transferred by the firm to the limited company on March 22, 1944. In 1945, Shri A. N. Mehra, the father-in-law of the assessed, left the partnership, and the assessed became the sole proprietor of the business of the firm. Then, on September 13, 1946, the entire land, measuring 48 bighas and 5 biswas, was purchased by the assessed in his own name from the municipality for a sum of Rs. 3,015. According to the assessed, the negtoiations for the purchase were going on for a long time commencing from March, 1941. After the said purchase, the assessed gto the land surveyed, gto the lay-out plan prepared and gto the same approved by the municipality, parcelled out the land into pltos, developed the area and sold the said pltos.
14. Thus, the various transactions mentioned above do suggest that at least from 1940, the firm was anxious to transfer its assets to the limited company and obtain the additional land on lease with the intention of transferring the said land also to the limited company, and nto to hold the same itself. Negtoiations for the purchase of the land from the municipality were started even in March, 1941, and after the purchase of the land in 1946, ntohing appears to have been done on the land by the assessed. On the toher hand, as already stated above, the assessed was taking steps to sell the land in pltos. Out of the entire land, he sold only a small extent to the limited company for about Rs. 16,150, while he sold a larger portion to about 88 parties, making a large profit. The said conduct of the assessed does show that his intention in purchasing the land in his own name was nto to hold the same for himself, but to re-sell the same for a profit. On a consideration of all the facts and circumstances, we are of the opinion that there was a scheme and a design on the part of the assessed in making the purchase and the sales, and the organized effort of the assessed to purchase the land and sell the same for profit indicates that he dealt with the land as a dealer or a trader, and that it was an adventure in the nature of trade. Our answer, therefore, to the first question referred to us is in the affirmative and against the assessed.
15. The second question for consideration is as to whether the order of the Tribunal was vitiated, as the Members thereof did nto refer their difference of opinion (as to the intention at the time of purchase) to a third Member. Section 5A(7) of the Income-tax Act, 1922, provides as follows :
" (7) If the Members of a Bench differ in opinion on any point, the point shall be decided according to the opinion of the majority, if there is a majority ; but if the Members are equally divided, they shall state the point or points on which they differ, and the case shall be referred by the President of the Tribunal for hearing on such point or points by one or more of the toher members of the Tribunal, and such point or points shall be decided according to the opinion of the majority of the Members of the Tribunal who have heard the case, including those who first heard it. "
16. Under this provision, if the Members of a Bench of the Appellate Tribunal are equally divided on any point or points, the said point or points have to be referred to one or more of the toher Members of the Tribunal for his or their opinion. A reading of the sub-section shows that it contemplates a difference amongst the Members on the conclusion on a point, and nto a difference in the reasoning or reasons for arriving at the conclusion. Therefore, if the Members agree on the conclusion on a point, but differ in the reasoning or reasons for arriving at the conclusion, the provision in the sub-section does nto apply, and the question of any reference to one or more of the toher Members does nto arise. In the present case, the point for determination was as to whether the profits arising from the sale or sales of the pltos should be subjected to income-tax as profits arising from an adventure in the nature of trade. In arriving at a conclusion on the said point, the Judicial Member took the view that btoh at the time of the purchase and at the time of the sale, the assessed's intention was to re-sell the land for a profit, while the Accountant Member took the view that the intention of the assessed at the time of the purchase was nto to re-sell the land for a profit, but that the subsequent conduct of the assessed showed that he had since become a trader. The Accountant Member accordingly agreed with the conclusion of the Judicial Member that the profits arising from the sale should be subjected to income-tax as profits arising from an adventure in the nature of trade. In toher words, the Members disagreed in the reasoning adopted by them in arriving at a conclusion on the point for determination in the appeal, but agreed with each toher on the conclusion on the point. As they were agreed about the final conclusion on the point for determination in the appeal, viz., that the profits made by the assessed should be subjected to income-tax, they did nto make any reference to a third Member. As already explained above, in dealing with the first question, a decision regarding the initial intention of the assessed at the time of the purchase is nto by itself decisive or conclusive. Liven if the initial intention was to purchase the property as an investment and nto to re-sell for profit, the assessed may change his mind and deal with the property subsequently as a trader, and enter into transactions which are in the nature of trade. Thus, a decision by a third Member on the question as to the initial intention at the time of the purchase was nto necessary, as on a consideration of the subsequent conduct of the assessed, the two Members were agreed that he dealt with the property as a trader, and that the profits arising from the sales effected by him should be subjected to income-tax, and that the appeals before them should be allowed. We are, therefore, of the opinion that the omission by the Members of the Tribunal to refer their difference of opinion on the question as to the intention of the assessed at the time of purchase to a third Member, did nto vitiate their final orders in the appeals before them. We accordingly answer the second question referred to us in the negative and against the assessed.
17. In the circumstances of the case, we make no order as to costs in this reference.
Kapur, J.
18. I agree.