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TMI Blog2016 (7) TMI 532X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee filed its return of income for the impugned assessment year on 31-10-2007 declaring total loss of Rs. 51,73,986/-. During the course of scrutiny assessment proceedings the Assessing Officer observed that the assessee has claimed business loss of Rs. 67,22,876/- on sale of Development Rights over land. The assessee along with one Mrs. Vasanti Shankar had entered into Development Agreement on 08-04-2002 in respect of land admeasuring 10,355.85 Sq. Mtrs. comprising in S. No. 17, Pot hissa No. 5, 6 & 7 at village Deolali, Distt.- Nashik for total consideration of Rs. 4,40,00,000/-. The share of the assessee in the joint venture was 45% and the investment made by the assessee in the said joint venture was Rs. 2,00,24,000/-. Subsequently, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has not been able to show from records that any development activity was carried out on the land in question. The ld. DR prayed for reversing the findings of Commissioner of Income Tax (Appeals) on this issue. 4. On the other hand Shri C.H. Naniwadekar appearing on behalf of the assessee vehemently supported the findings of Commissioner of Income Tax (Appeals) on this issue. The ld. AR submitted that the Development Agreement was entered into between Mrs. Vasanti Shankar and Mr. Tribhuvanlal (Proprietor of assessee firm) on the one hand as 'Developers' and the owners of the land on the other. The Nashik Road Devlali Vyapari Sahakari Bank (hereinafter referred to as "Bank") was the confirming party. The owners of the land had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The expenditure on leveling of land was also capitalized by the assessee in stock in trade. The construction/development work could not take off on the land primarily for two reasons : i. The land was mortgaged with the Bank. After initially giving the consent, the Bank had withdrawn the consent as the owners of land failed to repay the loan amount. ii. The total area of land under Development Agreement was 10,355.85 Sq. Mtrs. out of which 2156 Sq. Mtrs. was agricultural land. The owners of the land had agreed to convert the agricultural land into non-agricultural within two months from the execution of Development Agreement, which they failed to comply with. 4.1 The ld. AR submitted that the facts and the documents on record would cle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of India in the case of Radhasoami Satsang Vs. Commissioner of Income Tax reported as 193 ITR 321 (SC). The ld. AR to assert his submission that a single transaction can be treated as adventure in the nature of trade placed reliance on the following case laws : i. Khan Bahadur Ahmed Alladin & Sons Vs. CIT, 68 ITR 573 (SC); ii. G. Venkataswami Naidu & Co. Vs. CIT, 35 ITR 594 (SC); iii. P.M. Mohammed Meerakhan Vs. CIT, 73 ITR 735 (SC); iv. Bhogilal H. Patel Vs. CIT, 74 ITR 692 (Bom); v. Tribhuvandas Vallabhdas Vs. CIT, 61 ITR 518 (Bom); vi. Gurdial Narain Das & Co. Vs. CIT, 50 ITR 633 (Bom); vii. V. Ramanathan Vs. CIT, 51 ITR 640 (Mad); viii. DCIT Vs. Rajesh Builders in ITA No. 3980/Mum/2009. 5. We have heard the submissions made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in appeal has assailed the findings of Commissioner of Income Tax (Appeals) and the ld. DR has prayed for restoring the order of Assessing Officer on this issue. 6. After perusing the documents on record and appreciating the facts of the case we are of the considered view that the Assessing Officer has erred in holding the loss arising on sale of Development Rights as capital loss. 7. A perusal of the Development Agreement dated 08-04-2002 at pages 1 to 30 of the paper book clearly shows that the intention of the assessee was to develop the land and exploit it for commercial purpose. Clauses 6 and 10 of the agreement clearly spell out that the assessee intended to construct commercial and residential building on the land in question. A fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action may be the first transaction of the assessee firm but the sister concern of the assessee is already engaged in similar business. Therefore, it cannot be said that the assessee was not connected in any way with land development activities. 9. The second ground for making addition by Assessing Officer was that the co-owner of the assessee in its return of income has declared loss as capital loss. As has been stated earlier that a close scrutiny of Development Agreement clearly shows that the assessee had entered into Development Agreement for construction of residential and commercial building on the land in question. The co-owner of the assessee may have shown the loss arising from sale of Development Rights as capital loss inadverte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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