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2015 (7) TMI 280 - ITAT HYDERABAD

2015 (7) TMI 280 - ITAT HYDERABAD - [2015] 42 ITR (Trib) 638 (ITAT [Hyd]) - Treatment to gain on sale of property - 'Capital Gains' or under the head 'Business' as an adventure in the nature of trade - CIT(A) held 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.Held that:- We notice that the building permission filed before the CIT(A) is not the building permission required to establ .....

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me property of assessee. Therefore, the building permission granted 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 .....

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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’. Therefore, the matter can be remitted back to AO to examine the necessary permissions and actions of assessee and examine whether the transaction would come as an adventure in the nature of trade or to be assessed under 'Capital Gains - D .....

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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 .....

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2010 to 24-04-2010 and amounts were deposited in two installments i.e., ₹ 8.5 Lakhs on 10-06-2010 and ₹ 4 Lakhs on 11- 06-2010. As seen from the bank account, there are no other transactions of withdrawal of cash, therefore, assessee's explanation that the deposit of cash was from out of the withdrawals of the cash earlier can be accepted as a genuine explanation. In the absence of any contrary evidence that assessee has utilized these amounts which were earlier withdrawn. Assessee's .....

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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) .....

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M/s. M. Gopal Stone Cutting & Earth Contractors. The main reason for disallowing the expenditure was that AO held that there were cash payments which violated the provisions of Section 40A(3). He also gave an alternate observation that in case the amounts are to be assessed under the head 'Capital Gains' 50% of the expenditure claimed should be disallowed as non-genuine. AO also noticed that there was an amount of ₹ 12.50 Lakhs deposited in the bank account which assessee expla .....

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ure of trade as assessee is a non-resident and has intended to develop property as a residential house but when building was constructed, loans could not be obtained/NOC could not be obtained in view of the Metro Project which was passing through part of land. Therefore, since he could not finance the full construction, the property was sold along with a structure thereon to M/s. Transtroy India Ltd., and at the instance of the buyer, assessee had to execute 25 sale deeds with value of land and .....

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. CIT Vs. Suresh Chand Goyal [163 Tamnan 54 (MP) 298 ITR 277 (MP); f. ITO Ward-21(2) Vs. Sitaram Chamaria [6 SOT 594 (Mum)]; g. B. Venu Madhav Vs. ACIT, Circle-II(1), Hyderabad [41 Taxman 435 (2013)]; h. Barendra Prasad Ray Vs. 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) .....

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nce 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, there is only one issue raised by assessee in the appeal No. 307/Hyd/2015. The facts lead .....

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s and perusing the facts on record, we are of the opinion that assessee is not eligible for deduction u/s. 54F as nature of property has turned out to be commercial property and accordingly, provisions of Section 54F do not apply. In view of this, assessee's grounds on this issue are rejected. 7. In the result, assessee's appeal is dismissed. 8. Coming to the Revenue's appeal in ITA No. 389/Hyd/2015, apart from contesting the action of CIT(A) in treating the transaction of sale of co .....

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ders of the AO, whereas Ld. AR supported the order of the CIT(A). One Paper Book containing documents from 1 to 152 were filed in support of the contentions along with case law Paper Book. 10. We have heard detailed submissions and considered rival contentions. The facts indicate that assessee has acquired Plot No. 60 in Road No.5, Banjara Hills to the extent of 1170 Sq. Yds., on 5th July, 2005. His brother Shri K. Arun Krishna bought adjacent plot No.61A to an extent of 465 Sq. Yds on 21st July .....

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ished 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 struct .....

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the building permission filed before the CIT(A) is not the building permission required to establish that assessee intended to construct a residential building. As seen from the building permission, the permission was in the name of Shri D. Ram Mohan Rao, who incidentally was the owner of the plot which was purchased by assessee in the year 2005. As can be seen from the permission also the building permission was granted on 19-11-2005 i.e., much before the purchase of adjacent property by asses .....

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e opinion that 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 d .....

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ture of the building constructed by assessee nor the attendant factors in constructing and selling the property. Therefore, we are of the opinion that the matter can be remitted back to AO to examine the necessary permissions and actions of assessee and examine whether the transaction would come as an adventure in the nature of trade or to be assessed under 'Capital Gains'. AO is directed to examine all the factors and law as relied by assessee, after duly giving an opportunity of hearin .....

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hat 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 invoke .....

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