TMI Blog2011 (2) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... enture in the nature of trade. - ITA Nos. 429/2011, 430/2011 and 431/2011 - - - Dated:- 24-2-2011 - MR. JUSTICE A.K. SIKRI, MR. JUSTICE M.L. MEHTA, JJ. For APPELLANT : Mr. R.Santhanam and Mr. A.P.Sinha, Advocates. For RESPONDENT : Ms. Suruchi Aggarwal, Advocate. A.K. SIKRI, J. (ORAL) 1. All these three appeals arise out of the common order dated 27th August, 2010 passed by the Income Tax Appellate Tribunal (in short ITAT ) in three appeals which were preferred by these appellants/appeals. The three appellants are the partnership firms which are sister concerns. A partnership was entered into in respect of all three concerns, on the same date, with one partner as common partner. It is also an admitted case that as per the partnership deed, all these three firms were to do business of real estate developers, building, construction and sale and purchase of property or any other business which the partners mutually decide from time to time. For the assessment year 2006-07, the partnership firms in their return showed the business loss, and at the same time income from agriculture on the purchase and sale of the agriculture land. The Assessing Officer took a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... repeated here for the sake of brevity. The appellant has submitted copies of all submissions made before the AO. A careful perusal of materials on records shows following undisputed facts in the present case:- i) The assessee, firm, came into existence on 07.12.2004 with the objective of real estate developers, building construction and sale purchase of property. ii) The assessee had sold agricultural land in the relevant year. The land was purchased in FY 2004-05. Thereafter, the improvement cost (consisting of price of wire, sheets, building materials and labour charges) of Rs.21,54,075/- was incurred in FY 2005-06. iii) No agricultural operation on the land acquired by the appellant has been carried out during the relevant period, which is evident from the fact that no expenditure and or receipts are shown in the books of accounts though the details (khasra/khatuni) submitted during the appellate proceedings showed the agricultural crop on the land. iv) The clause 02 of partnership deed shows that the business had already commenced even prior to the relevant period. The clause 02 is extracted for proper appreciation of facts: That the business of firm sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with its other two sister concerns (one of the individual partner is common in all three firms/concerns. The second partner is closed hold company) bought land from borrowings. All these three concerns started buying land within adjoining area within 15 days from their existence. The investment from capital of the appellant is NIL. Thus it is clear that the appellant had an intention to sell them subsequently at a profit at the time of purchasing the land and that is why it has commenced the business with borrowed funds and thereafter it had incurred development expenses on the land so that the subsequent sale of this land may fetch commercial profit. This commercial motive is established by the fact that the appellant bought and sold after holding them for a period of 14 months. Therefore, the appellant has carried out its activity in systematic way to earn business profit. This activity has resulted sale consideration @ 250% of total cost (acquisition development cost). This profit therefore, is nothing but profit derived from business and profession only. Such an intention is clearly discernible from the gamut of facts and circumstances in the present case as the assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record but in practice and that is why these three inter related concerns bought land with such systematic objective, which have allowed them to merge/consolidate the land in technical manner so that it may fetch considerable profit. Therefore, they have achieved their business objective. Reliance is placed on the ratio reported in AIR 195 SC 513, 532 investment in such a designed way cannot be done at all specifically in land. 4. To summarize the aforesaid factual position which emerges on record, we may note that all the three firms came into existence on the same date with the objective of carrying out the business of real estate developers and building constructions, sale and purchase of property within fifteen days of the forming of the partnership. These three firms, with common partners, started purchasing the agricultural land in question which was purchased from numerous villagers. After the purchase of the said land in small fragments, the entire land was consolidated and improved. There were improvement costs of Rs. 21,51,075/- incurred upon the said land in financial year 2005-06. For the purchase of this land, no capital was contributed by the partners, instead, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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