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2016 (8) TMI 954 - KARNATAKA HIGH COURT

2016 (8) TMI 954 - KARNATAKA HIGH COURT - TMI - Sale proceeds from sale of flats - capital gain or business income - Held that:- Tribunal after considering the respective case of the assessee has found that the income derived by the assessee from the flat was treated as income from house property. Further the land of the property was retained for the last 15 years. The property was retained, developed by construction of flat and the interest for the loan taken has also been capitalized and not d .....

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ital gain and not the business income. - In our view, as such on appreciation of the evidence and material on record, the Tribunal has arrived at a finding on fact that it was a capital gain and not the business income. No substantial question of law - Decided against revenue - ITA NO. 325/2015 C/W ITA Nos. 326, 327/2015 - Dated:- 14-6-2016 - MR. JAYANT PATEL AND MR. B. SREENIVASE GOWDA JJ. APPELLANTS: (By SRI. JEEVAN J. NEERALGI, ADV. FOR SRI. E. I. SANMATHI, ADV.) O R D E R JAYANT PATEL J. .....

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earn profit out of business/adventure in the nature of trade which fulfills the ingredients for treating the income of the assessee as business income? 2. We have heard Sri. Jeevan J. Neeralgi and Sri. E.I. Sanmathi, learned counsel for the appellants/revenue. 3. As such it appears that when the matter was considered by the Tribunal, it was observed by the Tribunal at para 8 to 12 which reads as under:- 8. We have duly considered the rival contention and gone through the record carefully. The qu .....

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includes any trade, commerce, manufacture or both, i.e., trade and manufacture. The Hon ble Supreme Court in the case of G. Venkataswamy Naidu v. CIT (supra), has observed that this question has been the subject matter of several judicial decisions; and in dealing with it, all the adjudicators had unanimously agreed that no principle can be evolved which would govern all the cases in which the character of impugned transactions falls to be considered. According to the Hon ble Supreme Court, when .....

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of trade may partake the character in the nature of adventure in the nature of trade. But there cannot be a single decisive factor. Finding recorded by the Hon ble Court in para 13 of the judgment explaining the meaning and scope of adventure in the nature of trade is worth to note. It reads as under: 13. As we have already observed it is impossible to evolve any formula which can be applied in determining the character of isolated transactions which come before the Courts in tax proceedings. It .....

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de. Cases of realisation of investments consisting of purchase and resale, though profitable, are clearly outside the domain of adventures in the nature of trade. In deciding the character of such transactions several factors are treated as relevant. Was the purchaser, a trader and were the purchase of the commodity and its resale allied to his usual trade or business or incidental to it? Affirmative answers to these questions may furnish relevant date for determining the character of the transa .....

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nts associated with the purchase and resale? Were they similar to the operations usually associated with trade or business? Are the transactions of purchase and sale repeated? In regard to the purchase of the commodity and its subsequent possession by the purchaser, does the element of pride of possession come into the picture? A person may purchase a piece of art, hold it for some time and if a profitable offer is received may sell it. During the time that the purchaser had its possession he ma .....

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of all the relevant circumstances mentioned in any of them may help the Court to draw a similar inference; but it is not a matter of merely counting the number of facts and circumstances pro and con; what is important to consider is their distinctive character. In each case, it is the total effect of all relevant factors and circumstances that determines the character of the transaction; and so, though we may attempt to derive some assistance from decisions bearing on this point, we cannot seek .....

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under: (1) What is the intention of the assessee at the time of purchase of the shares (or any other item). This can be found out from the treatment it gives to such purchase in its books of account. Whether it is treated as stock-in-trade or investment. Whether shown in opening/closing stock or shown separately as investment or non-trading asset. (2) Whether assessee has borrowed money to purchase and paid interest thereon? Normally money is borrowed to purchase goods for the purpose of trade a .....

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ow transactions and high holdings indicate investment). (4) Whether purchase and sale is for realizing profit or purchases are made for retention and appreciation in its value? Former will indicate intention of trade and latter, an investment. In the case of shares whether intention was to enjoy dividend and not merely earn profit on sale and purchase of shares. A commercial motive is an essential ingredient of trade. (5) How the value of the items has been taken in the balance sheet? If the ite .....

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ents in that commodity? And vice versa. (7) It is for the assessee to adduce evidence to show that his holding is for investment or for trading and what distinction he has kept in the records or otherwise, between two types of holdings. If the assessee is able to discharge the primary onus and could prima facie show that particular item is held as investment (or say, stock-in-trade) then onus would shift to Revenue to prove that apparent is not real. (8) The mere fact of credit of sale proceeds .....

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ed that it is dealing as a trader in that item? Whether it had such an intention (to carry on illegal business in that item) since beginning or when purchases were made? (10) It is permissible as per CBDT s Circular No.4 of 2007 of 15th June, 2007 that an assessee can have both portfolios, one for trading and other for investment provided it is maintaining separate account for each type, there are distinctive features for both and there is no intermingling of holdings in the two portfolios. (11) .....

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tment has been accepted by the Assessing Officer as an investment. The assessee had retained the asset i.e., plot of land for more than 15 years. It indicate that he has the intention to keep the asset for earning long term capital gain or dividend in any other form. One of the objection raised by the Assessing Officer is that assessee had not the means to complete the project on his own funds. Utilisation of borrowed funds is one corroborative factor for considering a transaction in the nature .....

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such advance booking and can set off the interest expenditure, but since he has the intention to earn house property income, therefore, he has to capitalize the interest expenditure. The assessee has not converted his plot of land purchased on 04.09.1998 into stock-in-trade. There is nothing with the Assessing Officer which can create a dent in the explanation of the assessee and can doubt about his intention. The first appellate authority also has observed simplicitor that organized way of ent .....

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