TMI Blog2010 (7) TMI 1185X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 6 crores. The assessee treated the gains arising out of the above sale as long term capital gains. The long term capital gains worked out by the assessee came to ₹ 41,77,891/-. There was a loss reported in the other business carried out by the assessee to the extent of ₹ 4,67,806/-. Thus the assessee has returned a total income of ₹ 37,10,085/- for the assessment year under appeal. 4. The Assessing Officer in the course of assessment proceedings, discussed the issue in a detailed manner in pages 2 to 4 of the assessment order. The Assessing Officer pointed out that the property was treated by the assessee as a capital asset and it was for this reason the long term capital gains were offered by the assessee for taxation. The Assessing Officer observed that it could not be done. Rather, he held that the property at the time of sale was in the nature of stock-intrade of the assessee. 5. The Assessing Officer has discussed a series of reasons justifying his findings as the property sold by the assessee was stockin-trade. The first ground relied on by the assessing authority is that nature of the business carried on by the assessee was construction of multi s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business income, he declined to consider the protective assessments made on the basis of short-term and long-term capital gains. The appeal was thus, dismissed. 8. The assessee is aggrieved and, therefore, the second appeal before us. 9. The grounds raised by the assessee in this appeal read as follows: (i) That the orders of the authorities below in so far as it is against the appellant is opposed to law, facts, circumstances, natural justice, equity and all other known principles of law without jurisdiction. (ii) That the total income computed and the total tax computed is hereby disputed. (iii) The findings, reasons, conclusions of the learned authorities below is perverse, irrational, illogical and not based on the facts arising from the records, hence the order requires to be quashed. (iv) That the learned Authorities below on assumption, surmise and suspicion erred in holding the land and building as stock in trade and taxing the gain as business income. (v) The learned authorities below erred in taxing a sum of ₹ 6,21,85,075/- as business income. (vi) The learned authorities below erred in adopting the value of the land at ₹ 5,26,725/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he past. The building was not let out only for the last nine years. It could not be let out for the reason that there were number of practical hitches and suitable tenants were not available to take such huge property on rent. Non-letting out the property for the last nine years was only a co-incidence and not a purposive act of the assessee. This is very clear from the facts that prior to the latest nine assessment years, the property was let out for a long period. 2. The rent collected by the assessee for a long period on letting out the property was returned by the assessee for income-tax purposes as income from house properties . The rent was never returned as business income . The Income-tax department also assessed the rental income as income from house property. He has relied on the judgment of the Hon ble Karnatak High Court in the case of CIT Vs. Bhoopalam Commercial complex and Industries Pvt. Ltd, 262 ITR 517 where court has held that the assessee has to be viewed as owner of the commercial complex for the purpose of sec.22, when the assessee is receiving income from letting out of commercial complex and the rent was derived by the assessee in its own right. 3. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ective computations are untenable as the facts and circumstances do not support the propositions made by the assessing authority even in a distant manner. The assessee has treated the said property as capital asset and the income was assessed as house property income and depreciation was not claimed and there was no motive of business in selling out that property and in such circumstances, the asset sold was capital asset and the surplus arose out of the transactions should be rightly assessed as long-term capital gains. 14. Smt. Preeti Garg, the learned Commissioner of Income-tax appearing for the Revenue, relied on the detailed orders passed by the lower authorities. 15. The learned Commissioner relying on the judgments of the Hon ble Supreme Court in the cases of Shri Venkataswami Naidu and Company and Rajputana (Agencies) (Cited Supra) argued that keeping the immovable property ready for exploiting in a favourable market is a business proposition and at any rate the sale of property made by the assessee firm should be treated as an adventure in the nature of trade and, therefore, the assessing authority has rightly treated the surplus amount as business income of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me was assessed as income from house property. 22. The assessee has shown this particular asset as capital asset in its balance sheet through out the entire period, for which the property was owned and held by the assessee. The property was never shown as a current asset or as a part of stock-in-trade of the assessee. Even though, the assessee firm was constituted and re-constituted, those documents do not throw any light of support in favour of the Revenue to hold that the assessee had later on converted the asset to stock-intrade. As a matter of fact, there is nothing on record to support the argument of the Revenue that the said property was converted by the assessee firm as an item of stock-in-trade. It is to be seen that throughout its ownership, the assessee firm had treated this property as capital asset. 23. When we consider the fact that the property was held as capital asset and rental income arising out of let out property was offered and assessed as income from house property, it is to be seen that the contention of the assessee is convincing and forceful that the property sold by the assessee was nothing but capital asset. There cannot be any assessment of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Deprecation has not been claimed on the asset and rental income has been offered as house property income. Therefore, the propositions made out by the Assessing Officer on the basis of objects of the assessee firm do not hold in the present case. 26. We find that the Assessing Officer has over emphasized the logical implication of non letting of the property for a period of 9 years before the sale and made it the pre-dominant reason to hold that the transaction was one of adventure in the nature of trade. We find that the proposition made by the Assessing Officer is rather on presumptions. When the facts of case speak themselves, there is no room for proposition built on presumptions and assumptions how-so- ever logical they would be. 27. Therefore, in the facts and circumstances of the case, we hold that the land and building sold by the assessee was capital asset and surplus arose out of that sale is in the nature of long term capital gains and the assessee has rightly offered the surplus for taxation as long-term capital gains. 28. On the question of protective computation, so far as short-term capital gains is concerned, we had already recorded a findings of fact tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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