TMI Blog2015 (7) TMI 280X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the erstwhile owner of the plot No. 60 cannot be considered to be the intention of assessee, in constructing a residential building on the entire property in 2008. There must be some other plans sanctioned by the Municipal authorities for the construction on the above property on Plot No. 60 & 61A. Therefore, Ld.CIT(A) wrongly classified the building as that of a residential building as against the observation of the AO, that assessee has constructed a commercial building. Since the later approvals were not placed on record and copies of the 25 sale deeds are also not before us, we are not in a position to give any finding that assessee has intended to construct either a residential property or a commercial property. Since the basic information was not available on record, it is very difficult for this forum to approve either the action of AO who relied on Canadian Case Law as against various principle laid down by the Hon'ble Supreme Court in the case of G. Venkataswamy & Co Vs. CIT (1958 (11) TMI 5 - SUPREME Court). Moreover, there seems to be no examination of plans, investments, correspondence by the AO in coming to a conclusion that it is in the ‘nature of business’. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dey, JJ. For the Petitioner : Smt. Pallavi Agarwal, DR For the Respondent : Shri Y.R. Rao, AR ORDER PER B. RAMAKOTAIAH, A.M. : These two are cross-appeals by Revenue and assessee against the order of the Commissioner of Income Tax (Appeals)-X, Hyderabad dated 29-01-2015, on the issue whether the gain returned by assessee is to be assessed under the head 'Capital Gains' or under the head 'Business' as an adventure in the nature of trade. 2. Briefly stated, assessee is a non-resident individual. He filed return of income for the impugned assessment year declaring income of ₹ 4,61,77,622/- after claiming deduction u/s. 54F of the Income Tax Act [Act]. The income mainly consists of Long Term Capital Gains on sale of land and Short Term Capital Gains on sale of building. The Assessing Officer (AO) on consideration of the transaction involved was of the opinion that assessee indulged in adventure in nature of trade in constructing a commercial complex and selling the same. Accordingly, he determined the head of income as 'Income from Business/Profession' as against income from capital gains offered by assessee. In doing so, the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT [6 Taxman 19 (SC)]; i. Bharatiya Janata Party Vs. Dy.CIT [80 ITD 89 (Delhi)] and j. CIT Vs. Thiagarajan [129 ITR 115 (Madras)]. 4. After considering the submissions and also accepting the plan dt. 19-11-2005 issued by the Municipal Corporation of Hyderabad, Ld.CIT(A) was of the opinion that assessee's transaction is not in the nature of adventure in the nature of trade and accordingly, he directed the AO to treat the sale consideration under head 'Capital Gains' and not as 'Business Income'. With reference to expenditure also, he noticed that expenditure was genuinely claimed and directed the AO to allow the same as provisions of Section 40A(3) are not applicable when income was computed under the head 'Capital Gains'. with reference to the cash deposit of ₹ 12.50 Lakhs, CIT(A) accepted assessee's explanation that withdrawal in the month of April was source for amounts redeposited in June by assessee. However, with reference to claim u/s. 54F, Ld.CIT(A) upheld AO's observation and had not granted exemption u/s. 54F. Hence, both assessee and Revenue are in appeal. 5. As far as assessee's claim u/s. 54F is concerned, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessee on 08-08-2008. Assessee has constructed a building, the nature of which is not clear from record. AO gives a finding that what assessee constructed was a commercial building. Assessee furnished a Municipal Corporation permission dt. 19-11-2005 indicating that it has started residential building and therefore, there is no commercial activity involved in it. This permission of plan was not filed before the AO and admittedly, filed before the CIT(A) only. CIT(A) did not refer it AO under rule 46A and therefore there is violation of said rule. CIT(A) came to the opinion that assessee intended to construct residential building and subsequent problems encountered on building the structure like Metro Corridor coming in the way of plot and non availability of Bank loans has forced assessee to sell the building. Therefore, it is not in the nature of adventure in nature of trade, but only of exploiting the existing asset which should be considered under the head 'Capital Gains' only. Various case law was relied upon by assessee and CIT(A), to come to conclusion that the transactions could not be considered as business but only exploiting the existing asset. We notice that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ine all the factors and law as relied by assessee, after duly giving an opportunity of hearing to assessee in this regard. Ground Nos. 3 to 8 raised by Revenue were accordingly allowed for statistical purposes. 11. Coming to Ground Nos. 9, 10 11 on the cost of construction, we agree with the Ld.CIT(A) that the expenditure which was otherwise held genuine, cannot be disallowed under the provisions of Section 40A(3). As seen from the orders, an amount of ₹ 45.50 Lakhs was disallowed on the reason that assessee has not furnished the details of payments whereas it is on record that assessee has furnished necessary bills and vouchers. Moreover, with reference to ₹ 2,86,71,752/- disallowed u/s. 40A(3), AO gives finding that entire payment was in cash. As seen from the Ledger A/c filed only part of the expenditure was in cash i.e., particularly for labour and purchase of sand etc. AO treated the payment made to purchase of lift also as that of cash, whereas the bill itself indicate that assessee has paid by various cheques. Since only provisions of 40A(3) are invoked, there is no question of treating the expenditure as 'non-genuine' as no amount was disallowed u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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