TMI Blog2019 (11) TMI 913X X X X Extracts X X X X X X X X Extracts X X X X ..... of taxation. Proper Head of Income Capital Gains OR Business Income - HELD THAT:- It is undisputed fact that the assessee never offered any business income on trading of land either in the past or in future assessment years. It is also born out of the records that the said asset has been consistently shown as fixed asset and not as stock-in-trade. Regarding the Assessing Officer s claim that the said transaction constitutes an adventure in nature of the trade , we are of the opinion, test laid down in the case of G. Venkataswami Naidu [1958 (11) TMI 5 - SUPREME COURT] in matters of dispute relating to the adventure in the nature of trade, we find the CIT(A) analyzed the said judgement and gave a finding that the said test laid down is not applicable to the facts of the present case. Therefore, in our view, the transaction in question does not constitute adventure in the nature of trade Consolidated transaction on sale of land together with his wife constitute an adventure in the nature of trade. It is also submission of the assessee that the similar claim in his wife s case, co-owner of the property, was accepted by the concerned Assessing Officer taxing the gain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. During the proceedings before us, the Revenue filed the additional grounds and the same are extracted as follows:- 1. On the facts and the circumstances of the case, the Ld. CIT(A) was not justified in allowing the appeal of the assessee by ignoring the Explanation 2 of Section 2(47) of the Income-tax Act, 1961 wherein it was held that transfer includes and shall be deemed to have always included disposing of or parting with an asset or any interest therein, or creating any interest in whatsoever, directly or indirectly, absolutely or conditionally, voluntarily or involuntarily by way of any agreement. 2. On the facts and the circumstances of the case, the Ld. CIT(A) was not justified in holding that the transaction of capital gain as declared by the assessee be accepted despite the fact that 97% of the total sale consideration was received in the A.Y. 2008-09 and therefore the tax incidence would be in the A.Y. 2008-09 by virtue of provision of section 2(47) and section 45 of the Income-tax Act, 1961. 4. Further, the Revenue raised another additional ground , which is as under :- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -. 7. The background facts relating to the above-said addition on account of Gevrai land include that the assessee along with his wife purchased about 80 Acres 3 Guntha of land at Village Gevrai Taluka, Dist. Aurangabad. Out of that, the assessee purchased 32.15 Acres of land in the name his sons Shri Amit Jadhav and Shri Ajay Jadhav for a sum of ₹ 36,14,010/-. There is Visar Pavati (VP) found during search action in support of the sale. The relevant stamp paper was purchased on 01.02.2007. Bundle No.4, at pages 70 to 74 of the Paper Book contains the relevant Visar Pavati. The search resulted discovery of another agreement dated 02.06.2007 vide Bundle No.14 at pages 177 to 181 of the Paper Book. These agreements were registered between Shri Ajay Shivajirao Jadhav, Shri Amit Shivajirao Jadhav, and Smt. Meera Shivajirao Jadhav on one side and Shri Sanjeevkumar Harkchand Kankariyaon on the other side. Further, these parties sold the said land to Mr. Abbdul Kalik Abdul Karim Barudgar, Mr. Rafik Makbul Kureshi for an agreed price of ₹ 9,49,57,325/-. As per the assessee, the possession of land is not given by the assessee in the assessment year 2008-09. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se paragraphs, the CIT(A) extracted the observation of the Assessing Officer as well as the written submissions of the assessee. The assessee defended that the transactions with regard to the sale of land that Gevrai is a capital gain transaction only and not the business transaction. Further, the assessee also submitted that the sale of transaction of the same is completed in the relevant year 2011-12. In para 2.8.3 of the CIT(A) s order, the assessee narrated that he never offered any business income on account of sale of land in the past year or in the future. Therefore, as per the assessee, treating the transaction of sale of land as the adventure in the nature of trade, should not arise. Referring to Gevrai land in particular and the book entries thereof, assessee submitted that the said asset was originally shown in the books from the assessment year 2006-07 onwards as an item of fixed assets in the balance sheet. In support, the assessee furnished the balance sheet for the assessment years 2006-07, 2007-08 etc. The assessee relied on the principle of consistency as laid down by the Jurisdictional High Court in the case of CIT vs. Gopal Purohit, 336 ITR 287 as approved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransaction of the land trading. 2.8.8 In view of the above discussion, I do not find any material brought out by the learned A.O. to justify to hold that the transaction is adventure in nature of trade . I hold that the transaction of capital gain be accepted as declared by the Appellant. 11. Regarding the other addition on account of deemed income from let out properties of ₹ 5,35,641/-, relevant facts include that the Assessing Officer noticed that the assessee lives in a row house 43/44, Himali Society, Erandwane, Pune. The Assessing Officer invoked the provisions relating to the Self Occupied Property and the ALV for other vacant properties and estimated ALV of the same at ₹ 5,62,892/-. Rejecting the assessee s offer of ₹ 27,251/- against the ALV, the Assessing Officer added the balance amount of ₹ 5,35,641/-. 12. In the first appellate proceedings, the CIT(A) confirmed the addition made by the Assessing Officer as per the discussion given in para 2.5.1 to 2.5.5 read with para 2.9.1 of the order of the CIT(A). For the sake of completeness, the contents of para 2.5.5 are extracted hereunder :- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de the following written submission :- Respondent assessee contends that the income from GEORAI Land should be taxed under the head 'Capital Gains' and not under the head 'Profits and Gains from Business or Profession on following points: a) GEORAI Land is held as Fixed Assets in the Books of Accounts. The audited accounts of various years are already placed on record, wherein, GEORAI land appears as Fixed Asset (and not as any stock-in-trade / Current asset). b) Real estate transactions executed in past and future years has been disclosed as Capital Gain by respondent assessee and the same is accepted by the I-T Authorities. (Details already submitted as Annexure-1 of Synopsis-1). c) Transaction by Mrs. Meerabai Jadhav (wife of respondent assessee, who was also the joint seller of GEORAI Land) has been disclosed as Capital Gain and the same has been accepted by the I-T Authorities. Copy of return of income and computation of income is attached herewith as Annexure-2. Respondent assessee in this regard is placing reliance on following judicial pronouncement (apart from one re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee is placing reliance of the order of the Honorable Bench for A.Y. 2009-10 in this regard. However, the ld. DR for the Revenue read out the contents of para 2.9.1 read with para 2.5.1 to 2.5.5 of the CIT(A) s order. 17. Having discussed the facts and the arguments of the counsels on all the issues, now we proceed to adjudicate the issues as under :- A. Year of Taxation 18. The case of the Revenue on this issue is that, with receipt of ₹ 5.8 crore out of the total considering of ₹ 5,92,53,200/-, the payment received in the year under consideration works out 97.88% of the total consideration. As per the Revenue, the amount stands accrued for taxation in the year under consideration. Therefore, relevant year for taxation of gains is A.Y. 2008-09 and not the A.Y. 2011-12 as admitted by the assessee. In the process, the Assessing Officer rejected the assessee s claim and the facts mentioned in the Visar Pavati that possession of land is not given to the buyer, the date of registration falls in the assessment year 2011-12 and the balance amount of ₹ 12,53,250/- was received in the assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h happened in the assessment year 2012-13 in this case. Thus, the year of possession of land, payment of entire consideration and the compliance to the conditions stated in the agreement are the relevant factors that decides the year of taxation. In the present case, these events happened only in the assessment year 2011-12 and not in the current assessment year 2008-09. 22. Accordingly, we are of the opinion that the year of taxation in the assessment year 2011-12 offered by the assessee and not assessment year 2008-09 as considered by the Assessing Officer in the assessment. Therefore, the relevant issue is decided in favour of the assessee in respect of year of taxation. B. Proper Head of Income Capital Gains are Business Income 23. The assessee offered the gains under the head capital gains in the assessment year 2011-12 and paid the taxes as relevant to the said year. However, the Assessing Officer disturbed the year of taxation as well as the head of income. Stating that the assessee is a land trader, the Assessing Officer proceeded to treat these transactions on sale of land as an adventure in the nature of trade . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 959) 35 ITR 594 (SC). The relevant part of the decision is as under: 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 besides 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. 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. Cases of realisation of investments consisting of purchase and resale, though profitable, are clearly outside the domain of adventures in the nature of trade. In deciding the character of such transactions several factors are treated as relevant. Was the purchaser a trader and were the purchase of the commodity and its resale allied to his usual trade or business or incidental to it ? Affirmative answers to these questions may furnis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase followed by resale can either be an investment or an adventure in the nature of trade. There is no middle course and no half way house. This statement may be broadly true ; and so some judicial decisions apply the test of the initial intention to resell in distinguishing adventures in the nature of trade from transactions of investment. Even in the application of this test distinction will have to be made between initial intention to resell at a profit which is present but not dominant or sole ; in other words cases do often arise where the purchaser may be willing and may intend to sell the property purchased at profit, but he would also intend and be willing to hold and enjoy it if a really high price is not offered. The intention to resell may in such cases be coupled with the intention to hold the property. Cases may, however, arise where the purchase has been made solely and exclusively with the intention to resell at a profit and the purchaser has no intention of holding the property for himself or otherwise enjoying or using it. The presence of such an intention is no doubt a relevant factor and unless it is off set by the presence of other factors it would raise a stron ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re extracted hereunder :- 16. The core ground raised by the Revenue in its appeal reads as under :- 1. On the facts and circumstances of the case, the Ld.CIT(a) was not justified in deleting the addition made by the AO on account of income from let out properties without appreciating that municipal value does not represent the fair rent which a property can fetch if let out. It is computed very mechanically by the corporation and is not revised periodically. 17. Relevant facts include that the AO in the course of assessment proceedings that in the preceding A.Y. 2007-08, the annual let out value of vacant house properties were determined @7% of the investment value. Relying on the judgment of CIT Vs. Radhika Devi Dalmiya 125 ITR 134 (Allahabad High Court the AO estimated the annual let out value of the property at ₹ 6,26,235/-. During the First Appellate Proceedings, the CIT(A) allowed the claim of the assessee and commented upon the judgment of CIT Vs. Radhika Devi Dalmiya that it is specific on its own facts and not applicable to the case of the assessee. 18. On hearing both the parties and peru ..... X X X X Extracts X X X X X X X X Extracts X X X X
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