TMI Blog2015 (12) TMI 1292X X X X Extracts X X X X X X X X Extracts X X X X ..... where the construction and sale of the flats do not change the character of the asset and there was no material to show that the Assessee ever had the intention to exploit the plot as a commercial venture, the transaction cannot be characterized as ‘an adventure in the nature of trade’ leading to the resultant receipt as business income in her hand. The fact that the Assessee got a flat on the rear second floor apart from the original constructed portion on the ground floor made no difference to the nature of the transaction. The AO, the CIT (A) and the ITAT have proceeded on an erroneous legal premise that the agreement entered into by the Assessee with the builder and the consequent sale of the flats by the builder on behalf of the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be under her occupation for more than 30 years. The aggregate cost of construction was about ₹ 86,285. 4. On 2nd March 1988 the Assessee entered into an agreement with M/s. Mac Consolidation ( the builder ) for construction of additional area on the property in question. However, this agreement did not materialize on account of financial strains, old age and ill health. Thereafter, on 1st April 1989 a fresh agreement was entered into by the Assessee with the builder, a copy of which has been placed on record, stating that the Assessee had approached the builder for their assistance in the construction of the said residential building on the terms and conditions set out in the earlier agreement dated 2nd March 1988. 5. This agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. 7. The net result of the above agreement was that the entire pre-determined cost of construction was to be incurred by the builder and the Assessee was to be provided with a flat on the rear of the second floor at a pre-determined cost of ₹ 5,32,855. The Assessee was also entitled to the share of the profit on the sale of the flats. 8. The Assessee filed her return of income for the AY in question on 11th October 1990 declaring a profit of ₹ 4 lakhs under the head long term gain and claimed deduction of ₹ 3,75,000 under Section 54B of the Act. The Assessee also declared net taxable income of ₹ 7,500 under the head 'capital gains'. 9. The said return of the Assessee was accepted by the Revenue u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1125 1125 2250 Rear second floor -- -- 2250 Total Sq.ft. 9900 11. Earlier, by a separate letter dated 22nd October 1997, the Assessee has furnished the names and addresses of the parties to whom the flats were sold. It appears that the rear and front flats on the first floor, the front flat on the second floor and the basement were sold to the different parties. The additional fact that requires to be noticed is that construction, profit and loss account (P L) of the builder for the year ended 31st March, 1980 was placed on record before the AO. In the Con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner of Income Tax (Appeals) [ CIT (A) ] was dismissed on 8th March 2000. While dismissing the appeal filed by the Assessee against the order of the CIT (A), the ITAT held in the impugned order as under: 24. It is quite apparent from the facts of the case that the intention of the Assessee at the outset was to get the flats constructed by the contractor deploying his own funds (the contractor s) and receiving in the process a sum of ₹ 4 lakhs being the excess of sale consideration over the cost of construction of the flats as also a flat on the second floor, the value of which was ₹ 5,32,855. The original property, i.e, ground floor and the mumty has remained untouched since the agreement between the Assessee and the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le of the flats only the cost of construction was considered. 16. On the other hand Mr. C.S. Aggarwal, learned Senior counsel for the Assessee, placed reliance on the decision of this Court in Shanti Banerjee (decased) by LRs v. Dy. Commissioner of Income Tax (decision dated 17th November 2015 in ITA No. 299 of 2003) where in similar circumstances the Court held that the transaction was not an adventure in the nature of trade and the receipt therefrom was not business income. As regards the plea that the construction took place on the additional portion of land apart from the originally constructed portion, it is pointed out that the entire facts were placed by the Assessee before the AO. 17. The Court finds that merely because the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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