TMI Blog1997 (1) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... of lands and buildings to Simpson and Co., was assessable only under the head 'Capital gains' and since the transfer was by a subsidiary company to a holding company, the same is exempt under section 47(v) of the Income-tax Act, 1961 ? (4) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal's view that the holding, viz., lands transferred by the assessee during the year were held by the assessee only as investment and not as stock-in-trade, is based on valid and relevant material and is sustainable in law?" In so far as question No. (1) is concerned, that was not pressed at the time of the hearing. Accordingly, we are returning the same unanswered. The assessee, Simpson General Finance Company Ltd., is one of the Amalgamation group of companies. The assessment for the assessment year 1975-76 was completed on a total income of Rs. 34,59,470. In the assessment made, the Income-tax Officer included a sum of Rs. 32,12,184 being the profit on sale of land and buildings. The assessee acquired 1,773 grounds and 1,741 sq. ft. from Amalgamations Ltd., on April 30, 1957. A portion of these lands was sold to the various units of the Simpson group. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchased the land and would not have resorted to the arrangement of lease. Obviously, the arrangement had been to assign different rules to different companies in long-term plan. It would have put the companies to great financial strain if they had purchased the lands and hence till they build up resources, possession by another group company had been resorted to, and the intention must always have been to make the group companies sooner or later owners of the land, the assessee selling the same. The contentions that the assessee had not been dealing in investments of immovable properties and it was formed for the main business of hire purchase financing are contradictory to what has transpired, viz., acquisition by the assessee of the lands from Amalgamations Ltd., and leasing of the land to the group companies for long periods. The conduct of the assessee-company to hold the lands and providing services to the companies, who had put up structures, was in keeping with the scheme formulated and, therefore, the conduct for the time being will not constitute evidence of the ultimate intention to sell the lands to the group companies. The methods in which the accounts are maintained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions such as advances of funds to Amalgamations Ltd., recoupment of the loan by taking over land belong to that company, utility of the land as provision of site by the group companies for the duration till they are capable of acquiring the land and providing services, such as maintenance of roads, lighting, watch and ward, etc., and ultimate disposal of the land to the group companies should be considered as forming an adventure in the nature of trade or as constituting business in real estate. Therefore, the gain arising from the sale of the lands should be assessed under the head "Business" and not under the head "Capital gains". On the other hand, learned counsel appearing for the assessee submitted as under : The assessee had never been dealing in investments of immovable properties. The assessee-company was formed for the main business of hire purchase financing. The fact that lands and buildings had been fixed assets was not disputed by the Department at any time in the earlier assessments. The only question whether roads and compound walls were entitled to depreciation or not, had been decided. Except roads, ponds, etc., which could not be leased out, lands had been lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Amalgamations Ltd., by the assessee were unsecured and had not been secured on the lands. Therefore, the transactions should not be equated to a case where the property of a debtor is brought by the lender towards realisation of the loan with the object of reselling the property at a profit. This establishes the fact that this is not a sale in the normal course of business, giving of sale of capital assets, giving rise to capital profit. The profit is not available for distribution of dividends. Under a resolution authorising sale of land, sale took place. It is not a sale of stock-in-trade. Therefore, the gains from the sale of the land should be assessed under the head "Capital gains" and not under the head "Business". We have heard both learned standing counsel appearing for the Department as well as learned counsel appearing for the assessee. In the present case, as far as the lands are concerned, the assessee had purchased them from an allied concern and sold them also to allied concerns. After purchase of the land, the assessee retained it with them for more than a decade. Even when a portion of the land was surrendered to one or other of the allied concerns, that was d ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
