TMI Blog2018 (11) TMI 107X X X X Extracts X X X X X X X X Extracts X X X X ..... business; and is, therefore, exempt from tax under Section 3(2) of the Wealth Tax Act. The Income Tax Appellate Tribunal is the final Court of fact. An appeal to the High Court lies, under Section 27A(2) of the Wealth Tax Act, only if the High Court is satisfied that the case involves a substantial question of law. We are satisfied that the findings of fact recorded by the Tribunal, and its conclusions on law, are not such as to necessitate interference in proceedings under Section 27A of the Wealth Tax Act. We see no reason, therefore, to interfere with the impugned orders passed by the Tribunal. Appeal dismissed. - W.T.A. No.2 of 2017, W.T.A. Nos.1, 2 AND 3 of 2018 - - - Dated:- 11-10-2018 - SRI RAMESH RANGANATHAN AND SMT KONGARA VIJAYA LAKSHMI, JJ. For The Appellant : Sri Challa Gunaranjan, Learned Counsel For The Respondent : Sri J.V.Prasad, Learned Senior Standing Counsel for Income Tax COMMON JUDGMENT: ( per Hon ble Sri Justice Ramesh Ranganathan) W.T.A. Nos.2 of 2017 and 3 of 2018 are filed by Sri Devineni Avinash aggrieved by the order passed by the Income Tax Appellate Tribunal, Visakhapatnam bench, Visakhapatnam in WTA No.1/Vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer, and had claimed that the subject land was immoveable property; just because the land was under a joint development agreement, it could not be presumed that it was held for the purpose of commercial exploitation, for it to be classified as stock-in-trade; the assessee had failed to prove with evidence that the subject vacant land was held by him as stock in trade; on the other hand, the Income Tax return, filed by the assessee for the assessment year 2009-2010, was in ITR Form No.2 which was the form prescribed for individuals and Hindu undivided families not having income from business or profession; this abundantly proved that the assessee was not involved in any business; by his conduct, the assessee had proved that he was not carrying on any business either in the past or in the future; on a development agreement being entered into, the activities of the developer would constitute business activities, and not that of the assessee; the assessee had purchased the land as an investment; consequently any accretion from the land would be assessable only under the head income from capital gains ; and the assessee had failed to prove that the subject land was held by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stock-in-trade, is established by the fact that no proceedings were initiated to assess the appellant to tax under the head capital gains on the execution of a joint development agreement. Learned Counsel would rely on G. Venkataswamy Naidu v. Commissioner of Income Tax AIR 1959 SC 359 ; Dalmia Cement Limited v. The Commissioner of Income Tax (1976) 4 SCC 614 and Chaturbhuj Dwarkadas Kapadia v. Commissioner of Income Tax (2003) 260 ITR 491 (Bom) . On the other hand Sri J.V. Prasad, Learned Senior Standing Counsel for Income Tax, would submit that the assesse s proclaimed intention to carry on business, and to treat the subject land as stock-in-trade must be evidenced from certain other facts apart from their self-serving claim; merely because a memorandum of understanding had been entered into, between the assessee and the developer, would not justify the inference that the assessee intended to carry on business using the subject land as stock-intrade; it is evident from the material on record that the assessee neither carried on business before, or at any time thereafter; in fact the return filed by them, in ITR Form No.2, is a return which is required to be filed by in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exceeds fifteen lakh rupees. Under the proviso thereto, in the case of every assessment year, commencing on and from the 1st day of April, 2010, the provisions of this Section shall have effect as if for the words fifteen lakh rupees , the words thirty lakh rupees had been substituted. Section 2(m) of the Act defines net wealth to mean the amount by which the aggregate value, computed in accordance with the provisions of this Act, of all the assets, wherever located, belonging to the assessee on the valuation date, including assets required to be included in his net wealth as on that date under this Act, is in excess of the aggregate value of all the debts owed by the assessee (on the valuation date which have been incurred in relation to the said assets). Section 2(ea)(v) of the Act defines assets , in relation to the assessment year commencing on the 1st day of April, 1993, or any subsequent assessment year, to mean urban land . Explanation (1)(b) thereunder defines urban land , among others, not to include the land held by the assessee as stock-in-trade for a period of ten years from the date of its acquisition by him. The dispute, in the present case, revolves ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rade ( Narain Swadeshi Weaving Mills v. Commissioner of Excess Profits 6; G. Venkataswami Naidu Co. AIR 1959 SC 359 ; Saroj Kumar Mazumdar v. Commissioner of Income-tax, West Bengal AIR 1959 SC 1252 = ( 1959 ) 37 ITR 242 ( SC ) ; Dalmia Cement Ltd. ( 1976 ) 4 SCC 614 ) . The fact that the transaction is not in the way of business of the assessee does not alter the character of the transaction ( G. Venkataswami Naidu Co. AIR 1959 SC 359 ; Saroj Kumar Mazumdar AIR 1959 SC 1252 = ( 1959 ) 37 ITR 242 ( SC ) ; Dalmia Cement Ltd. ( 1976 ) 4 SCC 614 ). 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 would also be inexpedient to make any attempt to evolve such a rule or formula. Generally speaking, it would not be difficult to decide whether a given transaction is an adventure in the nature of trade or not. It is the cases, on the border line, that cause difficulty. ( G. Venkataswami Naidu Co. AIR 1959 SC 359 ). Sometimes it is said that a single plunge in the waters of trade may partake the character of an adventu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, it is necessary to remember that they do not purport to lay down any general or universal test. The presence 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 to deduce any rule from them and mechanically apply it to the facts before us. ( G. Venkataswami Naidu Co. AIR 1959 SC 359 ). Judges appear to be agreed that no principle can be evolved which would govern the decision of all cases in which the character of the impugned transaction falls to be considered. ( G. Venkataswami Naidu Co. AIR 1959 SC 359 ). No general principle can be laid down to cover all cases because of their varied nature, and each case should be decided on the basis of its own facts and circumstances. ( Dalmia Cement Ltd. ( 1976 ) 4 SCC 614 ). The d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g all the facts and circumstances in the case, the Court may, despite the said initial intention, be inclined to hold that the transaction was not an adventure in the nature of trade. ( G. Venkataswami Naidu Co. AIR 1959 SC 359 ). A profit motive, in entering into a transaction, is not decisive, for an accretion to capital does not become taxable income, merely because an asset was acquired in the expectation that it may be sold at a profit. ( Janki Ram Bahadur Ram 1965 ( 57 ) ITR 21 ). It must also be borne in mind that, unlike cases of commercial commodities, a transaction of purchase of land cannot be assumed, without anything more, to be a venture in the nature of trade, as these are cases in which the commodity purchased and sold is not ordinarily commercial, and the manner of dealing with the commodity does not stamp the transaction as a trading venture. ( Janki Ram Bahadur Ram 4; Reinhold 9; Saroj Kumar Mazumdar AIR 1959 SC 1252 = ( 1959 ) 37 ITR 242 ( SC ) ; Leeming ( 1930 ) 15 T . C . 333 ). If a person invests money in land intending to hold it, enjoys its income for some time, and then sell it at a profit, it would be a clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r indicated therein. Form No.ITR-2 is the return of income, for individuals not having income from business or profession, in terms of Rule 12 of the Rules. Rule 12(1)(d) of the Rules, as it then stood, stipulated that the return of income, in the case of an individual deriving income from a proprietary business or profession, shall be in Form No.ITR-4, and be verified in the manner indicated therein. Form No.ITR-4 is the return of income, for individuals having income from a proprietary business, in terms of Rule 12(1)(d) of the Rules. The appellants-assessees had filed their return, for the assessment years subsequent to the date of purchase of the property, in Form No.ITR-2 and not in Form No.ITR-4, thereby treating the subject land as an investment or a capital asset, and not as stock-in-trade under the head current assets . Further, in their Balance Sheet, filed in the immediately following assessment years (i.e. after the date of purchase of the subject land), the subject land was shown as a fixed asset (immovable property), and not as a current asset (stock-in-trade). If the appellants-assessees had intended to use the land for the purpose of carrying on business, it wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on business. The mere fact that the appellants-assessees had entered into a joint development agreement with a builder, the very next date of purchase of the subject property, would not, in the absence of any other material on record, by itself amount to the assessees having treated the said subject land as stock-in-trade for the purpose of carrying on business. Mere execution of a development agreement would not, by itself and without anything more, mean that the owner of the land also intended to carry on business using the subject land as stock-in-trade, for the owner may well have decided to part with the said land for other reasons also. Sri Challa Gunaranjan, learned counsel for the appellantsassessees, would submit that, if the appellants are held to have treated the subject land as a capital asset , the assessing authority would have treated transfer of the said asset, pursuant to the joint development agreement, as liable to tax as capital gains under Section 45 of the Income Tax Act; and the very fact that they did not, reflects their understanding that the assessees intended to treat this asset only as a stock-in-trade for the purpose of carrying on business. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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