TMI Blog2018 (9) TMI 149X X X X Extracts X X X X X X X X Extracts X X X X ..... MANISH BORAD, A.M: These two appeals filed by the assessee pertaining to A.Ys. 2012-13 2013-14are directed against the order of Ld. Commissioner of Income Tax(Appeals)-I, Indore,(in short CIT(A) ), vide appeal No. IT-752/14-15 No.IT-23/2016-17 order dated 04.11.2015 01.05.2017 which is arising out of the order u/s 143(3) of the Income Tax Act 1961(hereinafter called as the Act ) framed on 28.01.2015 29.01.2016 by ACIT-3(1), Indore. 2. As the issues raised in both these appeals relates to same assessee and issues are identical, these were heard together and being disposed off by this common order for sake of convenience and brevity. 3. Briefly stated facts, as culled out from the records are that the assessee is engaged in the business of retail trade of country made liquor and foreign liquor. Return of income for Assessment Year 2012-13 and Assessment Year 2013-14 were filed on 23.1.2013 and 29.4.2014 declaring income of ₹ 3,22,49,498/- and ₹ 2,47,87,020/- respectively. Cases for both the years were picked up for scrutiny through CASS, followed by the issuances of statutory notices u/s 143(2) of the Act and u/s 142(1) of the Act which were duly serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it as its business profit. 6. The Ld. Counsel for the assessee referring to the written submissions made before the Ld. CIT(A) submitted that the assessee s main business is of trading of liquor. Investments were made to purchase land and they were shown under the head of Fixed Assets, and the assessee is not engaged in the activity of purchase/sale of land. The purpose of approaching M/s. Aarone Developers Pvt. Ltd was only to fetch better price for the land and also to find the buyers who were interested to purchase the land She held these lands as a capital asset. The amounts received from this company for the sale of the land has been shown as a long term capital gain/short term capital gain in accordance with the period of holding of the properties. The accounts are audited and the Tax Audit Report is obtained. The assessee acquired the agricultural land of 6. 53 Htrs. at village Jhalaria in the year 2006. This land was held by the assessee as an investment. The assessee entered into an understanding with M/s Aarone Developers Pvt. Ltd., Delhi, for development and sale of this land. The Company Aarone had entered into similar understanding with various land owners holding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll the owners. The assessee along with the other owners also signed the sale deeds because the transfer can be effected only by the owners. It is worth noting fact that the total sale consideration was received by Aarone and was deposited in their bank - account. The proportionate consideration was received by the assessee from Aarone in installments. Thus, it establishes the factual position that the assessee has not dealt with the said land as a trading activity but has received the consideration in parts on the sale of a capital asset from the developers. Under these circumstances the capital gains is correctly shown by the assessee on the sale of the capital asset and cannot be taxed as a business profit. The case laws cited by the Ld AO are not applicable in the instant case since the assessee had purchased this land not with the intention of doing any business but held the same as a capital asset. We would like to draw your honours kind attention to the following judgments wherein it has been held that if the plots are sold for getting better price then it would be a capital gain and not the business income. CIT v/s Suresh Goyal 298 ITR P. 277 (MP) CIT v/s Gajanana Ente ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31.03.2012 1883489 3,19,197 (STCG) 3 10/07/06 548209 (Survey No. 17/ 2, 54/2, 31.03.2012 20323345 1,97,75,136 (LTCG) 29/1, 64/1 4 10/02/06 123477 31.03.2012 5547543 54,24,066 (LTCG) Assessment Year 2013-14 S. No Date of purchase Cost of acquisition Survey No. of the land Date of sale Sales consideration Capital Gain offered in Rs. 1 13/08/20 10 2236365 (Survey No.27) 31.03.2013 46,890,752 23,53,387(STCG) 2 01/04/20 10 1529420 (P-3) 31.03.2013 44,90,799 29,51,379 (STCG) 3 F.Y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Aarone Developers Pvt.Ltd aarone group 6th Floor, Select City Walk, A-3, District Center, Saket New Delhi To, Ms. Anita Singh EF-14, Schme No.54, Vijay Nagar Indore. Dear Sir. This is confirm that we have accounted for the FY 2011-12 amount payable to you against the sale of your land. Total sales of the year - 786,983,437 Less: Expejnse paid by us on various A/c - 21,751,725 Net Amount received by us - 765,231,712 Share of Ms.Anita Singh Amt. of total sale 33,222,388 This letter is being given to you for your purpose and request Thanks, Director Aarone Developers Pvt. Ltd. 6th Floor. Select City Walk. AG3, District Center, Saket, New Delhi PAN AAACV0276C 3.2 Further, as submitted by the assessee she has .given a plot of land measuring 6.03 hectares to M/s .Aarone developers Pvt. Ltd. for sale and received consideration from the said company as and when the land was sold by the company. The assessee has reduced her part of land giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es the price by 20. Normally on the basis of agreement the business of property is done by doing regular sales and purchases but in the present case, the assessee has never undertaken any such activities. In fact, assessee was not acting even as a builder during the relevant point of time and therefore this land was purchased only as an investment and was also reflected in the Balance Sheet as an investment. If a person invests money in land intending to hold it, enjoys its income for some time and then sells it at a profit, it would be a clear case of capital accretion and not profit derived from an adventure in the nature of trade. It is important to understand the distinction between dealer mid investor status. The term 'dealer' is widely used to denote one who holds real property for sale rather than for investment purposes. Factor to consider in determining dealer versus investor status include the following The nature and purpose of the property acquisition and period of ownership, The length of time the property Was held, The reason that the property was held The nature and extent of any improvements The extent of developing and subdividing the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 83,58,365/- -do- Agricultural Land at Sulakhdi 27.01.2012 1,85,86,260/- -do- 3.7 From the above chart, it amply establishes that the assessee is frequently purchasing plots of land since 01/04/2010 and is engaged in the trading activity through M/s Aarone Developers Pvt. Ltd . 3.8 The claim of the assessee with regard to Capital Gain arising on account of 'sale of land is not considerable. in view of the facts that the assessee has failed to 'quantity the actual land exclusively pertaining to her which was sold by MIs .Aeron Pvt. Ltd during the year whereas no actual transfer of specific piece of land owned by the assessee is ascertainable. To compute and claim Capital Gain the cost of acquisition of the capital asset being sold must be ascertainable from the documents against 'purchase of land which is being transferred, otherwise the GCapital Gain so computed would not be actual and authentic. In the assessee's case !he cost of acquisition of the land (exclusively pertaining to the assessee) and sold through M/s Aarone Pvt. Ltd. is not quantifiable and capita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disposc off the land in whole therefore she bad a verbal understanding with M/s Aarone Developers to sale the land available with her by making value addition to the land so as to fetch better price us and 'when the good pricing is available in the market. Since both the parties were not interested to fix up the prices as the guideiines in the coming years were bound to change hence they have not agreed to enter into any official agreements. The land was not transferred to M/s Aarone. The ownership remained 'with assessee and was to be part with in Piece as and when the peace of laud is sold, It was given to M/s Aarone just to hnpie111ent the development work and no document was registered for the purpose. M/s Aarene developers has made similar arrangements with various other land owners of adjoining lands. After making value addition to the land the land was to be sold out to different persons. Since M/s Aarone has combined an the lands and has got single map sanctioned from the competent authority, it was difficult to identify individual piece of land and area. combined by individual land owners after development hence, whenever 'any particular area/plots ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as a business venture. Where the person goes further and divides the land into plots, develops the area to make it more attractive and sells the land not as a single unit and as he bought it, but in parcels, he is dealing with land as his stock-in-trade; he is carrying on business and making a profit. The same fora was delved by the Hon'ble Karnatka High Court in the case of CIT Vs. Ramaiah Ors.146ITR 39 and P. Kannan Vs CIT(Kar) 154ITR 441 wherein the Hon'ble High Court held that 'Sale of land after plotting is a Business Venture '. The decision of the above judicial pronouncements are squarely applicable in this case. 3. It is also beyond doubt that the activity carried out by the assessee is nothing but purchase and sale of land amounting to trading with a view to earn more profit. In light of the discussion held hereinabove, it establishes that the activity of the assessee is nothing but an adventure having nature of Trade. Hence, Capital Gain offered on account of Sale of land is treated as Business Income. M/s Aerone Pvt. Ltd has borne all the expenses arising on account of Development and sale of land and the assessee has received her share from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adventure having nature-of Trade. Hence, Capital Gain offered on account of sale of land is treated as Business Income. MJs Aarone Pvt. Ltd has-borne all ~he expenses arising on account of Development and sale of land and the assessee has received her share from net sale receipts of M/s Aarone Pvt. Ltd. Hence, no 'expenses' are allowable in the case of the assessee. 4.4 Further, during the Assessment Year under consideration the assessee has carried out business on account of Trading in Sale Purchase of land through M/s Aarone Developers Pvt. Ltd. as per detailed, submissions made during the Assessment proceedings. Therefore, net sale proceeds received by the assessee amounting to ₹ 2,79,10,951/- as admitted and disclosed in the form of STCG/LTCG in the return filed is treated as Income from Business and taxed accordingly. 14. After careful perusal of the detailed findings of fact by the Ld. Assessing Officer as well as Ld. CIT(A) and the submissions made by the Ld. Counsel for the assessee before us and before the lower authorities, it can be construed that for assessing the profit from transaction of sale of asset as Capital Gain or business income, de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchasing the property, the length of its ownership and holding, conduct and the subsequent dealing of the assessee in respect of the property, the manner of disposal and the frequency and multiplicity of transactions offers a valuable guide in determining whether the assessee was carrying on a trading activity and whether a particular transaction should be stamped with the character of a trading adventure . 17. So the crux of the above discussions is that we will have to consider the cumulative effects of all the factors as well as the action taken by the assessee in order to sale the land. 18. Firstly we find that the assessee kept on purchasing land in the same very area on various dates which was falling in the financial year 2005-06 and 2006-07 and financial year 2010-11. Secondly, sale of land have been effected with the assistance of developer M/s. ADPL, New Delhi. Thirdly, as per the sale deed the assessee has transferred the title in their land along with 17 other owners of other pieces of land. Fourthly, assessee has received the consideration of sale at the year end i.e. as on 31.3.2012 and 31.03.2013 which shows that at the end of the year the account has been mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of attorney to decide about the sale and development of the land bank. All the sale transactions were effected through it and the land owners used to get their share excluding the expenditure as well as excluding the portion of land which has been used for development. Through this process the assessee gained substantial amount which has been spread over to A.Y 2012-13 and 2013-14. 21. In our considered view as well as in the given factual matrix it is crystal clear that it was a well thought business project carried out by the assessee jointly with 17 other persons by way of taking the services of Developer M/s. ADPL and the intention of entering into an adventure of business was very clear from the very first day of purchase of impugned land and completed on selling the residential plots. We are of the considered view that both the lower authorities have rightly appreciated the facts and concluded that the profits from sale of land situated at Village Jhalaria, Tehsil Indore is a business profit and cannot be taxed as Short Term Capital Gain or Long Term Capital Gain. In the result these common issue raised for both the assessment years is decided against the assesse. We th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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