TMI Blog2016 (7) TMI 532X X X X Extracts X X X X X X X X Extracts X X X X ..... e facts. The present land transaction 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. 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 inadvertently or out of ignorance, but it would not bind the assessee to give the same treatment in its books of account, when the facts on record distinctly indicate that the Development Rights were acquired by assessee as business venture. We do not find any infirmity in the findings of Commissioner of Income Tax (Appeals) admitting the claim of the assessee on this issue. Hence, no interference is called for in the impugne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urn of income has claimed the loss on sale of Development Rights as Capital Loss . The present land transaction was the only transaction involving sale and purchase of land entered into by the assessee. Prior to this transaction or thereafter, the assessee has not entered into any transaction with respect to sale and purchase of land. The assessee is engaged in the business of wholesale trading of explosive products and not in the business of land development. The ld. DR further submitted that 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 ) wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness asset and not as investment. Once, a particular asset is qualified to be a business asset by applying purpose test, the asset does not cease to be a business asset merely because the asset could not be used for the intended purpose due to reasons beyond the control. The ld. AR submitted that the treatment given by the other co-owner is not binding on the assessee. If the other co-owner treated the loss as capital loss then it is not necessary that the assessee should also treat loss as capital loss. The Revenue s reliance on the other co-owner s case is totally misplaced. 4.2 The ld. AR submitted that the assessee s treatment of land as stock-in-trade has never been disturbed by the Revenue in the past. In the assessment year 2005-06, the assessment order was passed u/s. 143(3). It was categorically submitted to the Assessing Officer that the assessee is also engaged in the land business. Even in the subsequent assessment year i.e. assessment year 2008-09 the Assessing Officer has himself admitted in order passed u/s. 143(3), that the assessee is engaged in the land business. It is only in the impugned assessment year that the Assessing Officer has disputed the fact merely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer and held the loss on sale of land Development Rights as business loss. The Revenue 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 further perusal of Clause 7 of the Development Agreement reveal that part of the land for which Development Rights were acquired by the assessee jointly with Mrs. Vasanti Shankar was agricultural land. The owners of the land had agreed to obtain necessary permissions for conversion of land from agricultural to nonagricultural. Thus, the Development Agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X
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