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TMI Blog2014 (11) TMI 1119X X X X Extracts X X X X X X X X Extracts X X X X ..... as an investment, giving rise to capital gain, instead of accepting the business loss claimed by the assessee in the return. The learned CIT (A) further erred in holding that sale consideration is to be deemed equivalent to the value on which stamp duty was paid by the vendee on purchase of this property. 3. The brief facts of the case are that the assessee is an invididual. He is running a proprietorship concern in the name and style of M/s Madhura Developers. A survey u/s 133A was carried out in the premises of the assessee on 7.7.2010. He filed his return of income on 15.10.2010 declaring a total income of Rs. 3,00,75,130/-. The case of the assessee was selected for scrutiny assessment and notice u/s 143(2) was issued on 19.01.2011. Questionnaires u/s 142(1) were issued on various dates. On scrutiny of the accounts, it revealed to the Assessing Officer that the assessee had claimed a loss of Rs. 98,62,500/- on sale of a property. The breif facts in respect of this transaction are that the assessee had entered into an agreement on 31.12.2005 to purchase a property at 9/1A, Arekere Village, Begur Hobli, Bangalore with M/s. Namaste Exports Ltd, for a total consideration of Rs. 4, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... registering the sale deed is Rs. 1400/- per sft. This aspect was not challenged by the assessee before the Assessing Officer also. In other words, the assessee did not dispute about the fair market value of the property notified by the State Gvot. for the purpose of charging stamp duty. The assessee could have challenged it as per sub section 2 of section 50C and in that case the matter ought to be referred to the evaluation cell. it is not discernible that this stand has taken by the assessee. Thus to this extent, there are no dispute between the parties on the facts. 6. The dispute is, whether the business loss shown by the assessee can be converted in the capital gain?. Whether the assessee had made investment or it was a business venture?. The learned Counsel for the assessee has raised multi fold contention while impugning the order of the learned CIT (A). His first contention was that the assessee is in the business of real estate. He is a developer, therefore, he had been purchasing the land for the purpose of the business. In this transaction, the investment was made in trading field. The advances paid by the assessee were shown as a current asset in the account. For this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a business income. The assessee has filed revised return for assessment years 2007-08 and 2008-09, but these returns have been filed after the survey operations i.e. on 29.11.2010. The return for the present year was filed on 15.10.2010. Thus there is nothing on the record which can suggest that the advances paid by the assessee at a sum of Rs. 3,20,00,000/- as on 31.03.2008 to the vendor i.e. Namasthe Exports Ltd was paid for acquiring stock-in-trade for the purpose of the business. It was a simplicitor investment at the end of the assessee and on sale of investment, only capital gain would arise to the assessee. The assessee in order to buttress his contention has relied upon the following decisions: i) ACIT vs. Madan Lal Ahuja (1982) 136 ITR 640 (All.) ii) CIT vs. Bilahari Investment (P) Ltd vs. (2008) CIT 299 ITR 1 (SC) iii) CIT vs. Nagri Mills Co. Ltd 33 ITR 681 (Bom.) iv) K.H.Mody, In re (1940) 8 ITR 179 (Bom.) v) Karamchand Thapar & Brothers vs. CIT 82 ITR 899 In the case of Madan Lal Ahuja (Supra), the assessee had purchased land measuring 28,278 yards which he developed as a colony and sold in small pieces. The facts leading to that case suggest that land was purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee by taking proportionate value of the cost of acquisition vis-à-vis sale value by keeping in mind the area sold. Therefore, these decisions are of no help to the assessee and not applicable on the facts. Similarly the facts in the case of Karam Chand Thapar vs. CIT (Supra) are quite distinguishable. The Hon'ble Court has observed that whether a particular loss is a capital loss or a revenue loss is a mix question of law and facts and dependent upon the facts of each case. Therefore, on the basis of the facts of the present case, we have held that the assessee has made investment which has been realised in this year and the capital gain would arise to the assessee. 8. In the next fold of submission, the learned Counsel for the assessee submitted that perusal of section 50C(1) would reveal that it is applicable when land or building or both are sold. The assessee was in possession only rights in the agreement to purchase which cannot be equated with land or building possessed by the assessee. Therefore, section 50C is not applicable in the present case. In order to buttress his contention, he relied upon the judgment of Bombay Bench of the ITAT in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hts were sold by the assessee. In that background, the Tribunal has observed that section 50C is not applicable. In the present case the assessee was possessing right to land which was not disputed by the vendor. As we have earlier observed that it was an investment at the end of the assessee, and the sale of this piece of land, capital gain would arise to the assessee which is to be computed as per section 48. The moment computation is to be made according to section 48, then consequently section 50C is applicable. The learned CIT (A) has appreciated the controversy in right perspective. 9. The assessee has not treated the property as a stock in trade. Therefore, on transfer of this property, only capital gain would arise to the assessee and it would be computed as per section 48 r.w.s 50C of the Act. Section 50C contemplates where, the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both is less than the value adopted or assessed by any authority of a State Govt. for the purpose of the payment of stamp duty in respect of such transfer, the value so adopted or assessed shall for the purpose of section 48 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agri Mills Co. Ltd (Supra). We do not find any merit in the contentions of the assessee, because we have upheld the action of the Assessing Officer that the assessee has treated the purchase of the plot as an investment. He has sold his investment in three parts. With regard to earlier two sale transactions, he has already offered the income under the head "capital gain" but later on revised his stand. This rivision has been made after the survey operation. It was not a venture for business purpose. Therefore, the assessee cannot be permitted to claim that he has completed the project of development in this year and income is to be recognised in this year. The loss, if any, though represent to earlier years, not to this year. More so, if the rates for determining the sale consideration for the purpose of section 50C is to be seen, then it would suggest that there is no loss. The loss has been computed by taking the sale consideration at Rs. 902/- per sft and the cost of acquisition at Rs. 1085/- per sft. We do not know the guideline value of the property on 26.03.2007 when the assessee sold two pieces of land. If it was more than Rs. 1085 per sft, then there could not be any loss a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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