TMI Blog2015 (1) TMI 649X X X X Extracts X X X X X X X X Extracts X X X X ..... reason with the Assessing Officer to bring to tax the impugned sum in the instant assessment year. Thus, for all the aforesaid reasons, we affirm the conclusion drawn by the CIT(A) and as a result Revenue fails on this aspect also. - Decided against revenue. - ITA No. 61/PN/2007 - - - Dated:- 31-12-2014 - Shri G. S. Pannu And Shri R. S. Padvekar,JJ. For the Petitioner : Shri Hari Kishan For the Respondent : Shri B.C. Malakar ORDER Per G. S. Pannu, A. M. This appeal filed by the Revenue is directed against the order of the Commissioner of Income-tax (Appeals)-I, Pune dated 03-10-2006 which, in turn, has arisen from order dated 21-03-2006 passed by the Assessing Officer under section 143(3) of the Income-tax Act, 1961 (in short the Act), pertaining to the assessment year 2003-04. 2. In this appeal, Revenue has raised the following Grounds of Appeal :- 1) The order of the learned CIT(A) is contrary to law and to the facts and circumstances of the case. 2) On the facts and in the circumstances of the case, the Learned CIT(A) grossly erred in deleting the addition of ₹ 45,52,700/- made in the assessment under the head 'business' / & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erial perused in order to dispose of the captioned appeal of the Revenue. 5. Firstly, in relation to the character of income earned on sale of plots at Kondhwa, Pune the relevant facts are as follows. The respondent assessee is an individual who is, inter-alia, stated to be engaged in the business of builder under the name and style of its proprietary concern M/s. Sanas Builders. Apart therefrom, the return of income filed by the assessee for assessment year 2003-04 shows that assessee earned income by way of income from house property , capital gains and under the head income from other sources . In the return of income filed, assessee had declared sale of four plots at Kondhwa, Pune on 30-08-2002 for a total consideration of ₹ 60 lakhs. As the said plots were acquired by the assessee in February and April, 1995, assessee claimed the income arising on sale of such plots as an income assessable under the head capital gains . The net long term capital gain on sale of the aforesaid plots was computed at ₹ 35,35,016/- and after setting off the brought forward short term capital loss for the earlier years and adding the short term capital gain for the year under con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Notably, the stand of the assessee before the lower authorities was that though the land was shown in the financial statements of the proprietary concern, M/s. Sanas Builders but the same was shown as Investment in the Balance Sheet since its date of acquisition and not treated as stock-in-trade. Assessee explained that since acquisition in Financial Year 1994-95 and till its sale during the year under consideration, the said property was reflected as an investment in the respective Balance Sheets for all the intervening years. It was also contended that the property was purchased by the assessee in his individual name and not in the name of the proprietary concern and that the funds which were utilized to purchase the property were also out of his personal bank account and not from the bank account of the proprietary concern. It was also contended by the assessee that there was no development activity carried out during the period of holding of the land and that only an expenditure of ₹ 7,300/- was spent which was primarily for its upkeep and maintenance only. 8. Before CIT(A), it was also pointed out that the conversion from Agricultural Zone to Residential Zone was don ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Supreme Court in the case of Saroj Kumar Mazumdar vs. CIT, 37 ITR 242 (SC), no universal test can be laid down to determine whether a given transaction is an adventure in the nature of trade or otherwise. In the present case, the return of income filed by the assessee for the assessment year under consideration, a copy of which has been placed in the Paper Book at pages 25 and 26 itself shows that one of the activities of the assessee is construction activity carried out in his proprietary concern, M/s. Sanas Builders. It is also evident that assessee has prepared Balance Sheet and Profit and Loss Account for his proprietary concern separately than his Personal Balance Sheet and Profit and Loss Account. In such a situation, a presumption was drawn by the Assessing Officer that the impugned transaction of sale of land was a business transaction, since one of the activities of the assessee was undertaking construction activity. Nevertheless, such a presumption is not conclusive, but is required to be established having regard to the complete attendant facts and circumstances of the case. What such a presumption implies is that the onus is on the assessee to say that such an incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the agreement registered. Secondly, it was pointed out that the agreement itself does not envisage any development by the assessee. It was also pointed out that during the period of holding of the land by the assessee there was no development plan submitted to any of the local authorities to reflect any intention for development. It was asserted that no building plan or laying of internal roads, etc. was done by the assessee. Only an expenditure of ₹ 7,300/- was spent on removal of weeds and grass from the land in assessment year 1999- 2000, which could not reflect any development activity. It was contended that incurrence of such an expenditure cannot be construed as a development expenditure or to say that it reflects any intention of the assessee to undertake development of such land as stock-in-trade. The assessee also submitted that the expense of ₹ 7,300/- incurred in assessment year 1999-2000 was taken as a part of the cost of investment and not debited in the Profit and Loss Account of the proprietary concern. Factually speaking, on all these aspects, there is no dispute. In-fact, there is nothing to suggest that during the period of holding of land by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into Residential Zone and a No Objection Certificate was obtained just before the sale of land even though the lands were actually converted into Non-Agricultural use only on 06-01- 2004, which was much after the date of sale by the assessee. As per the CIT(A), the obtaining of NOC as per ULC authorities before sale was for the purpose of getting a higher price for the property and assessee cannot be faulted for getting the better price for his investment. The CIT(A) has also inferred that merely because the agricultural plots were converted into Residential Zone prior to its sale in August 2002 without any intent of development would not make the transaction as a business venture. In our considered opinion, the aforesaid inferences of the CIT(A) cannot be faulted and the same indeed are borne out of the material on record. At this point, we may also observe that even for an investor, the steps taken by him to maximize his profit on sale of investment would not render such profit to be looked upon as business profits. The intent to maximize the gain on sale of investment cannot, by itself, reflect any intention of making business profits unless the factual matrix demonstrates so. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g that transfer could be inferred only on execution of the conveyance deed as held by the Hon ble Supreme Court in the case of Alapati Venkataramaiah Vs. CIT reported in 57 ITR 185 (SC) and that in the present case the conveyance deed was not yet executed. With regard to the reference to section 2(47) of the Act by the Assessing Officer, the CIT(A) observed that the provisions of clause (v) of section 2(47) of the Act, which were relied upon, came into effect from 01-04-1988 whereas the transaction in question was entered on 20-03-1987. Therefore, according to the CIT(A), clause (v) of section 2(47) of the Act did not help the case of the Assessing Officer. The CIT(A) has made the following discussion while deleting the addition :- 4.2 I have gone through the facts of the case from the assessment order and also from the submissions made by the appellant. The property at Shivaji Nagar was transferred with all rights, title and interest for a total consideration of ₹ 31,37,500/- out of which, the appellant had already received a sum of ₹ 29,77,248/-, which was shown as advance. As per the terms of the agreement, the transferee M/s.Mantri Construction had been author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acquiring flats particularly in multi-storeyed constructions in big cities. The definition also does not cover cases where possession is allowed to be taken or retained in part performance of a contract, or the nature referred to in section 53A of the Transfer of Property Act, 1882. New sub-cls, (v) (vi) have been inserted in section 2(47) to prevent avoidance of capital gains liability by recourse to transfer of rights in the manner referred to above. In view of this factual legal position, the ground No.2 of the appeal is allowed Against the aforesaid, Revenue is in appeal before us. Before us the Ld. Departmental Representative pointed out that the verification exercise conducted by the Assessing Officer with M/s. Mantri Construction showed that the development of the said property and the units constructed thereon were sold by the said concern to the ultimate users. Therefore, the said amount ought to have been offered for tax by the assessee as the property in question stood transferred to the buyer. 15. On the other hand, the Ld. Counsel for the respondent-assessee has relied upon the order of the CIT(A) in support of the case of the assessee. 16. We have caref ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
