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DCIT, Circle 3 (1) , New Delhi Versus Sh. Vivek Khushalani

Receipt of security deposit - business income or capital gain - nature on income - Held that:- In order to hold that an activity is in the nature of an adventure, there must be positive materials to prove that the assessee intended to trade in such an activity. Moreover, the expression “adventure in the nature of trade' appearing in the definition of 'business' postulates the existence of certain elements in the adventure which in law would invest it with the character of trade or business. In t .....

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e considered view that Ld. CIT(A) has rightly deleted the addition on account of impugned receipt of security deposit as income of the assessee as Adventure in the nature of trade, which does not need any interference on our part, hence, we uphold the order of the Ld. CIT(A) on the issue in dispute and reject the ground in dispute raised by the Revenue. - I.T.A. Nos.776 And 777/DEL/2013 - Dated:- 1-9-2017 - SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER For The R .....

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2. The grounds raised in these Appeals are similar and common, except the different in figures, hence, for the sake of brevity, we are only reproducing the grounds in respect of assessment year 2009- 010 as under:- 1. Whether the Ld. CIT(A) has erred on facts and in law in deleting the addition amounting to ₹ 6,42,25,228/- made by the AO on account of amount received being adventure in the nature of trade. 2. The appellant craves leave for reserving the right to amend, modify, alter, add .....

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es. These lands are contiguous to each other. This land along with land of other family members was given on lease to one company namely M/s. Progressive Building Estate Private Limited (Hereinafter Progressive ) which had 50% shareholding of Khushalani family arid the balance 50% of Uppal Housing Limited. Progressive have PAN AAECP7966P and assessed at Ward No. 5(2), New Delhi. Progressive was incorporated for the purposes of development of IT/ITES Special Economic Zone, which was to' be th .....

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ng Limited. On getting the land notified, the MOU provided, that lease deed would terminate and that land will be purchased by progressive from the assessee. The SEZ notification was made on 17.11.2008, however, thereafter as the SEZ notified areas had lost its demand no further action was taken in this respect by the parties concerned. 3.2 The AO was of the opinion that the amount of ₹ 6,42,25,228/- received as security deposit against lease by the appellant from Progressive is in fact an .....

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ent u/s. 143(3) of the Act on 16.12.2011 at an income of ₹ 7,29,99,919/-. Against the assessment order, assessee appealed before the Ld. CIT(A)-VI, New Delhi, who vide his impugned order dated 01.11.2012 has allowed the appeal of the Ld. CIT(A)-VI, New Delhi. Aggrieved with the order of the Ld. CIT(A), the Revenue is in appeal before the Tribunal. 4. Ld. DR relied upon the Order of the AO and reiterated the contentions raised in the grounds of appeal. 5. On the contrary, Ld. Counsel of the .....

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opy of lease deed dated 17.4.2008 of agricultural land in the village of Ghamraoj, Gurgaon with Progressive Buildestate Pvt Ltd; copy of lease dated 17.4.2008 of agricultural land in the village of Bhondsi, Gurgaon with Progressive Buildestate Pvt. Ltd.; copy of lease deed dated 17.4.2008 of agricultural land in the Village of Mehandwara, Gurgaon with Progressive Buildestate Pvt Ltd.; copy of additional submission filed before CIT(A) in regard to addition on account of security deposit; extract .....

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gating to 60.0625 acres. The entire family got together and leased land to M/s. Progressive. It was the intention of the company M/s. Progressive to get approval of SEZ zone and then sell. In this behalf, an Application was made with the help of Uppal Housing Limited to achieve the objective. The lease was given by assessee on 31.03.2008 for ₹ 1,11,350/- per annum. Apart from it, the assessee also received security deposit from M/s. Progressive against the land given on lease amounting to .....

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ale deed. The assessee continued to own the land and had not sold or executed any sale deed or agreement to sell. A perusal of the aforesaid, establish that no right has been created in anyone's favour by the assessee during the relevant assessment year by entering into the impugned agreement regarding his land. Merely Receipt of security deposit cannot be said to have resulted in any accrual of income. Thus, from the facts stated above, it is crystal clear that the AO has erred in forming h .....

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or creating rights in all their operations) therefore ₹ 6,42,25,228/- is a receipt in the nature of trade. However, no material has been brought on record by the AO to indicate that any purchase/sale of the impugned land has taken place. We further find that the AO has wrongly concluded that since M/s. Progressive is deriving income from allotment of plots and shops/stall which according to him also results in the assessee deriving income from business and trading operations, therefore rec .....

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purchase and sale of land/plots etc., the company has to first acquire the land from the assessee by purchasing and then it has to develop the land and sell/allot plots and shops. Nothing has been done by the company or the assessee to come to a conclusion that an activity has been undertaken which activity has resulted in a profit and which activity is in the adventure in the nature of trade and such sale and profit thereon is taxable. We further note that an Income can be assessed as per the .....

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rried out any activity which tantamount to carrying out of business. Mere receipt of security deposit by the assessee cannot be said to be a profit arising out of an adventure in the nature of trade in the hands of the assessee. The AO. has tried to assess a receipt of security deposit as income arising out of an adventure in the nature of trade. However, to deem such a transaction to be an adventure in the nature of trade , there should have been a purchase and sale of land. No material evidenc .....

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t all would be done by the company M/s. Progressive, and by no stretch of imagination can assessee be doing business, because the assessee was to merely sell the land which was purchased in the year 1991-92 and 1992-93, which would have resulted in a capital gain. We further find that it has been held by the Hon'ble Apex Court in the case of Lahore Electric Supply 60 ITR 1 (SC) that Business as contemplated in section 28 is an activity capable of producing profit which can be taxed. Ordinari .....

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