TMI Blog2008 (5) TMI 362X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee had shown capital gains of Rs. 22,218 from the sale of land of survey No. 53 in village Bhatar, Surat. The AO found that the assessee inherited the land as a co-owner from her father Shri Bipinbhai D. Desai. The assessee then became partner in the firm M/s Saujanya along with other members of her family. The firm then developed and promoted a building in the name of Samta Apartment. As per the agreement whenever M/s Saujanya sold a flat the assessee received consideration for her portion of the land attributable to the flat sold. In reply to the show-cause notice the assessee submitted before the AO that the profit from the sale consideration of land was capital gains and not business income since the land was inherited by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counts of M/s Saujanya which the assessee has shown separately as her share of income from the said firm. Since the land was shown by her as capital asset the question of treating the sale proceeds on the transfer of land as business income was not correct. The contention of the AO that the assessee's father has earlier applied for permission to develop the land and construction of apartment building the assessee submitted that whenever land has to be developed the application for permission has to be signed by the landlord. It was not correct to say that all partners of M/s Saujanjya were close relatives of the assessee. It was submitted that if M/s Saujanya has conducted the business for profit the same has nothing to do with the land own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... All statutory liabilities were also to be met by Shri Desai and the role of the assessee would be to sign the documents. The CIT(A) further observed that the partnership deed was executed on 15th March, 2000 whereas the letter to Shri Parimal Desai was dt. 11th Jan., 1999. Thus, even though Shri Parimal Desai was originally appointed to construct the said building as a consultant architect as well as contractor/engineer yet subsequently the assessee joined in the firm along with Shri Desai and others to execute the job of constructing the building. He also noted that the assessee through the letter dt. 11th Jan., 1999 had appointed Shri Desai to construct the building and only the consideration to be received by her was Rs. 133 per sq. ft. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tnership firm which was to earn income from sale of flats as well as in the land each time the same was sold. The difference was that the buyer of the flat entered into two separate agreements-one for the flat and the other for the proportionate right of the land. According to the CIT(A) it was a structured deal to reduce expenditure of stamp duty as well as to earn income by the co-owners of the land. The CIT(A) therefore observed that at the bottom of it all the intention of the land owner was clear in spite of attempts to give this transaction a different colour, the attempts to exploit the land and earn profits. Therefore, taking into account the totality of the facts and circumstances of the case the AO was fully justified in treating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome. However, we observe that the date of conversion into stock-in-trade was assumed by the lower authorities as on 5th Aug., 1993 only on the basis that a valuation report of that date was available on record. On the other hand we find that permission for construction of multi-storeyed building was for the first time applied on 15th Jan., 1998. Thus, before the aforesaid date of 15th Jan., 1998 we find that no material was available on record which shows that the owner of the land had intention to convert the land into a business property. Hence, in our considered view surplus earned over the fair market value as on 15th Jan., 1998 only ought to be treated as business income of the assessee of the year under consideration. Before conclud ..... X X X X Extracts X X X X X X X X Extracts X X X X
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