TMI Blog2005 (6) TMI 221X X X X Extracts X X X X X X X X Extracts X X X X ..... t the SCOs were acquired by paying advance and the balance was paid in instalments and possession taken over. we have mentioned regarding submissions of the assessee that in the assessment year 1994-95, the Assessing Officer has also treated the income from sale of SCOs as capital gain, whereas in the years under appeal he has changed his opinion regarding character of the transactions and also brought it under the head 'business income'. Even on this plea, the assessee finds support that principle of res judicata does not apply to income-tax proceedings but to deviate from it, there should be change in the facts and circumstances, as observed in the case of CIT v. Dalmia Dadri Cement Ltd. [ 1969 (11) TMI 16 - PUNJAB AND HARYANA HIGH COURT] . Therefore, we are of the considered view that the CIT(A) was justified in directing the Assessing Officer to compute the income arising from sale of SCOs under the head 'capital gain' after necessary indexation. We uphold her order and do not find any merit in the common ground raised by the revenue in all the three appeals. The ground stands rejected. Conversely, it can be inferred that ALV is not to be disturbed which is comi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 2 for assessment year 1998-99 reads as under:- The CIT(A) has further erred in deleting the addition of Rs. 16,54,000 which was made by the Assessing Officer on account of brokerage. 3. Brief facts with regard to common effective ground No. 1 in all the appeals are that the assessee, engaged in the business of hotel and running a cinema hall, filed return on 30-11-1995 declaring a total income of Rs. 10,14,026, which included loss under the head 'Income from house property' amounting to Rs. 6,91,234 and capital gains amounting to Rs. 25,26,443. During assessment proceedings under section 143(3) of the Income-tax Act, the Assessing Officer found that in the assessment years under appeal the assessee had shown sale of certain Shop-cum-Offices (for short SCOs) which it had acquired on 17-11-1995 from M/s. Swastik Construction, which was owned by its Managing Director and advance of Rs. 9 lakhs was paid. When asked to furnish copies of sale deeds, the assessee furnished allotment letter only in respect of one SCO which had been allotted originally. No allotment letter was furnished with respect to other SCOs. The Assessing Officer, therefore, observed that the assessee had no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kaur Singh v. CIT [1983] 144 ITR 756 (Punj. Har.) and G. Venkataswami Naidu Co. v. CIT [1959] 35 ITR 594 (SC). Ld. AR submitted that the case of G. Venkataswami Naidu Co. relied upon by the Assessing Officer is in favour of the assessee. Ld. AR further submitted that the assessee has sold the same property in 1994-95 also, where the Assessing Officer has accepted its plea and treated the transaction as years under appeal the Assessing Officer has treated the income arising from sale of SCOs as business income. 6. We have heard both the parties, perused the orders of tax authorities and gone through the material available on record as well as the case law cited by the assessee. We find that the crux of the issue to be decided by us is whether sale of SCOs and profit arising therefrom is to be computed under the head 'profits and gains of business and profession' or 'capital gain' and whether the assessee held the property for the purpose of trade or for investment. It will be useful to go through the decisions relied upon by the Assessing Officer first so as to draw an inference whether he was right in treating the income arising from sale of SCOs as business income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the impugned order. In the case of H. Holck Larsen, the assessee undertook purchase and sale of shares and the transaction was held to be capital in nature. It was held that in order to determine whether one was a dealer in shares or an investor, the totality of all the facts will have to be borne in mind. If the transaction of purchase and sale was a business pursuit, profit would be definitely considered as business income. However, where the intention of the assessee at the time of acquisition of the property was not to resell the same immediately for profits but to earn profit therefrom, the assessee would be considered as an investor and the profit arising from the sale of property became his income from long-term capital gain and was assessable at a lower rate of tax. Such an intention was only one of the factors in deciding whether a particular asset was stock-in-trade or investment. 6.5 In the case of Michael A. Kallivayalil, following principles were laid down to determine whether a particular transaction was an adventure in the nature of trade; (1) The intention or domain in transaction is relative factor to arrive at the conclusion whether a particular transaction is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchase in June 1980, it took the assessee a good period of 19-20 years to dispose of the property and in case it was to be a business proposition then no prudent person would have waited for such a long period to dispose of the property, that the surplus resulting from the sale had to be treated as capital gains and not as one arising from an 'adventure in the nature of trade'. On further appeal, the High Court held that the character of a transaction cannot be determined solely on the application of an abstract rule, principle or test but must depend upon all the facts and circumstances of the case. If the transaction is in the ordinary line of the assessee's business, there would hardly be any difficulty in concluding that it was a trading transaction. But where it is not, the facts must be properly assessed to discover whether it was in the nature of trade. Substance of this decision further strengthened the case of the assessee in the sense that if the property was held for fairly long period then the income arising out of it was to be taken as capital gain. 6.7 In view of the decisions discussed above, following principles emerge:- (1) Character of a transaction ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the CIT(A) to not charging of interest under section 234B/234C. We find that relying on the decision in the case of CIT v. Ranchi Club Ltd. [2001] 247 ITR 209 (SC), she directed the Assessing Officer to delete the interest charged under section 234B/234C, in the absence of mention of charging of interest in the assessment order. We find that there is no mention of charging of interest in the assessment order but we also do not have before us ITNS-150, which is part of the assessment order as claimed by the revenue in ground of appeal. Therefore, we direct the CIT(A) to go through the record and find if there is any mention of charging of interest under section 234B/234C in ITNS-150 and act accordingly to give effect to the principle of law. 8. Coming to ground No. 2 for assessment year 1998-99, the brief facts are that during assessment proceedings, the Assessing Officer observed that while computing income from house property the assessee had claimed Rs. 16.54 lakhs as commission paid to brokers for rental income. When asked to justify the allowabilily of commission paid to brokers, the assessee submitted that the commission was a charge from rental income. The Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e do not find any express provision regarding allowance of any expenditure, brokerage, commission or by any one name, for determining ALV of the property. Rental income from property is assessed under the head 'Income from house property'. It will be pertinent to mention here that computation of income from different sources is done and taxed under five heads, i.e., (i) income from salary; (ii) income business; (iii) capital gains; (iv) income from house property; and (v) income from any other source. There are express provisions in each head for computation of income. Under the business head, actual expenditure is allowed as cash or mercantile basis, as per sections 28 to 43, while under the head 'salary' only standard deduction is allowed. Likewise, under 'house property', only standard deduction is sought to be allowed under section 24. Under the head 'Income from house property', ALV is computed on the basis of deemed rent, as per set formula enshrined in section 23 and thereafter standard deduction is allowed under section 24, as specifically provided under the Act. For computation of ALV, a formula has been enshrined in section 23. Combined rea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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