TMI Blog2016 (7) TMI 687X X X X Extracts X X X X X X X X Extracts X X X X ..... r the head ‘income from long term capital gains’. - Decided in favour of assessee - ITA No. 629/PN/2014 - - - Dated:- 20-5-2016 - Ms. Sushma Chowla, JM And Shri Pradip Kumar Kedia, AM For the Appellant : Shri C.H. Naniwadekar For the Respondent : Shri S.K. Rastogi, CIT ORDER Per Sushma Chowla, JM This appeal filed by the assessee is against the order of CIT(A)-IT/TP, Pune, dated 30.01.2014 relating to assessment year 2009-10 against order passed under section 143(3) of the Income-tax Act, 1961 (in short the Act ). 2. The assessee has raised the following grounds of appeal:- 1. That on the facts and in the circumstances of the case, the Commissioner of Income Tax (Appeals) IT/TP has erred in confirming the order passed by the Deputy Commissioner of Income Tax Ahmednagar treating the Long Term Capital Gains arised on sale of plot as business income. That the Long Term Capital Gains shown on sale of plot be treated as the Long Term Capital Gains and not as a business income. 3. The issue arising in the present appeal is with regard to treatment of gains arising on sale of plot. The case of the assessee before the authorities below was that the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial purposes. The Assessing Officer also considered that the assessee had provided areas for internal roads for the entire plot holders as well as constructed buildings thereon. Where the assessee had sold plots as well as residential and commercial units in the earlier years right from assessment year 2005-06, it was a repetitive affair and definitely fell within the head of income i.e. income from business. The Assessing Officer stressed that the intention of assessee right from the date of purchase of said property was to earn profit by converting it into NA and then plotting it and selling subsequently to various purchasers at very high prices being NA properties. Another point noted by the Assessing Officer was that the conversion into NA was vide Collector s order dated 11.06.2001 i.e. after purchase of the said plot on 30.08.2000. The Assessing Officer thus, computed the income from business at ₹ 26,31,299/-. 5. Before the CIT(A), the assessee stressed that in assessment years 2005-06 and 2008-09, three plots each were converted into stock in trade and the capital gains arising on conversion of six plots into stock in trade were disclosed as long term capital gains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and because of the land being of large area i.e. 5300 sq.mtrs. in April, 2001, it had sub divided the same into sub plots. Thereafter, he decided to construct housing scheme of ownership flats and the profits from the same were declared in assessment year 2005-06, where the assessee also declared short term capital gains on conversion of capital asset into stock in trade. The assessment for that year was competed under section 143(1) of the Act. In assessment year 2008-09 on three other plots, ownership flats were constructed and the assessee offered long term capital gains on conversion of capital asset into stock in trade, which was also assessed under section 143(1) of the Act. In the year under appeal, the assessee had sold two plots i.e. plot No.1 and 2 for consideration of ₹ 31 lakhs and the income arising therefrom was offered as income from long term capital gains. The learned Authorized Representative for the assessee stressed that in the earlier years the Revenue Department had accepted the conversion of his investment into stock in trade on which he had offered tax which was accepted by the Department. The learned Authorized Representative for the assessee pointe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 30.08.2000, wherein the land was shown to be residential non-agricultural as per the document dated 05.09.2001. The learned Authorized Representative for the assessee further stressed that when the assessment in the hands of assessee was being completed in the month of December, 2011, still no action was taken against the earlier assessment years, where the income has been assessed in the hands of assessee. The learned Authorized Representative for the assessee further pointed out that the intention had to be looked at the time of purchase and the intention to convert into plots was different, wherein the plots were sub divided, but the investment is being held till date. 10. We have heard the rival contentions and perused the record. The assessee for the year under consideration had declared income from long term capital gains on sale of two plots i.e. plot Nos.1 and 2 which was part of bigger plot owned by the assessee at Shrirampur. The assessee claims to have purchased NA property i.e. plot admeasuring 5362 sq.mtrs. in 2001. Since the plot of land purchased by the assessee was big, it was sub-divided into 12 suitable plots. Admittedly, the assessee provided for road within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch is placed at page 7 of the Paper Book, under which the said land holding is declared to be residential non-agricultural. Further, the assessee pointed out that the NA order referred to by the authorities below was in respect of sub-division of plot and which was not complicated or costly nor any time consuming affair. It was applied for NA order on 25.10.2000 and was issued to the assessee on 20.04.2001 and the fees paid by the assessee for obtaining the said NA order was only ₹ 3,595/-. The copy of NA order along with bifurcated layout plan are placed at pages 8 and 9 of the Paper Book. The perusal of layout plan reflects that the assessee had divided the plot into two while providing road in between, since the plot owned by the assessee was three side open and municipal roads were already available on each side of the land. On plot Nos.7, 8 and 12, the assessee has developed the flats on ownership basis. Further, on plot Nos.9, 10 and 11, the assessee also developed flats and offered the same on ownership basis. The assessee for both these transactions had offered the income first on conversion of investment into stock in trade and thereon, the profits from venture under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the way by dividing road. In such circumstances, it could not be said that the assessee had got involved in complicated process of sub division of plot. On one side of the sub divided plot, the assessee carried out the commercial activity of building two projects and on the other side, though there was sub division of plots, but as against the property purchased in 2001, the first sale of plots was made in financial year 2008-09 and some of the plots are being held by the assessee till date. One aspect to be considered herein is that in case a person is involved in business activity or in adventure in the nature of trade, the endeavour would be to sell the property at its earliest in order to generate profits which could be re-used for business activity carried on by the assessee, if any. However, the assessee had only one property which was purchased way back 2000 and two of the said sub divided plots are being sold in the year under consideration and the balance plots are being held by the assessee as on 31.03.2009. In such circumstances, can it be held that the assessee was involved into business activity or adventure in the nature of trade? It may further be pointed out that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land as investment and had computed the income from capital gains on conversion of investment into stock in trade and had further offered business profits on sale of flats and the same having been accepted and adopted in the hands of assessee, justifies the claim of assessee that the land held by it was for investment and its sale thereafter, results in income from capital gains. The intention at the time of purchase of land was for the purpose of investment and merely because the bigger plot was sub divided into smaller plots does not establish that the assessee s intention was to carry on the business activity. In this regard, other circumstances of the case have to be kept in mind i.e. as against the investment in August, 2000, as against part development of projects, the assessee had sold two plots of land during the year and other years, the balance plots of land are still available with the assessee. Merely because the assessee had divided bigger plot into small plots does not establish the same to be business activity carried on by the assessee or adventure in the nature of trade, keeping in view the other circumstances of the case. Accordingly, we find no merit in the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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