TMI Blog2020 (5) TMI 205X X X X Extracts X X X X X X X X Extracts X X X X ..... it is actually sold. Thus, the assessee has sold the capital asset held for long term, accordingly, gain arising from sale was eligible for deduction u/s 54F of the Act. Accordingly, we direct the A.O. to treat the property on sale of land as capital gains and given the benefit of exemption claimed by the assessee U/s 54F. Disallowance of expenditure towards development of property - A.O. has allowed 50% of the expenditure by stating that no supporting bills of expenditure were provided to him - HELD THAT:- It is clear from the findings of the ld. CIT(A) that he has totally discarded the observed of the A.O. for non-production of documentary evidence in support of the expenditure. However, in respect of giving this fact, the ld. CIT(A) has allowed on ad hoc basis only 40% of the expenditure so claimed was genuine and incurred for developing the property, therefore, eligible to be allowed as a deduction while computing capital gains on sale of this property amounting to ₹ 43,90,029/-. No justification in the order of the ld. CIT(A) for sustaining disallowance of 40% against the 50% disallowance made by the A.O., therefore, the A.O. is directed to allow full expenditure s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses and improvement cost, supporting documents regarding deduction u/s 54F and bank account for the year under consideration sought vide this notice. During the year under consideration assessee earned long term capital gain on sale of properties being land on different location and claimed exemption u/s 54F against such long term capital gain for purchase of house property at Bangalore. No deduction has been claimed u/s 54B, 54C, 54D, 54G, 54GA. Accordingly, it was argued that the A.O s exceeded the jurisdiction, in so far as the case was selected only for the limited scrutiny and there is no mention of case being selected with respect to the claiming of exemption U/s 54F of the Act. 7. The ld AR has further contended that as per CBDT instruction No. 20/2015 dated 29/12/2015 and Instruction No. 5/2016 dated 14/07/2016 the scope of enquiry in the cases selected for limited scrutiny should be restricted to the issue for which case has been selected for limited scrutiny. As per said instructions where during the course of assessment proceedings in 'Limited Scrutiny' cases, if it comes to the notice of the Assessing Officer that there is potential escapement of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eh Royal Residency Plot A-5 10,00,000 10,41,554 3. Fateh Royal Residency Plot B-4 10,60,000 12,18,300 4. Fateh Royal Residency Plot B-6 10,60,000 12,18,300 5. Fateh Royal Residency Plot G-2 17,50,000 17,50,000 6. Fateh Royal Residency Plot G-6 17,50,000 17,50,000 7. Fateh Royal Residency 7458 Sq Feet area through development agreement (Direct Patta in the name of Buyer) (Ld. AO taken value of ₹ 1193280/- i.e. 1/3 of 3579840/-) 35,79,840 11,93,280 8. Fateh Hills 27,35,000 27,35,000 That out of long term capital gain arise from the transfer of above referred properties, the assessee had claimed exemption u/s 54F against the purchase of residential house at Mumbai. However, the AO while framing assessment treated transaction of sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount has invested in this property out of sale proceed of property under consideration. It is pertinent to mention here that for the capital gain earned out of sale of these capital assets assessee claimed exemption u/s 54F for investment in residential property at Bengaluru. Further residential property purchased at Bengaluru was for personal use of assessee and not merely a capital investment. 14. In its order, the ld. CIT(A) after holding that purchase of property as capital asset, assigned only one reason in treating the plotting of land as Adventure in the nature of trade which is agriculture land converted in non agriculture land . The Ld. CIT(A) had referred following judicial pronouncements. (i) Rajendra Kumar Dwivedi vs. CIT [2012] 26 taxmann.com 84 (All) (ii) Ramswaroop Saudagar vs ITO [ITA No 329/JP/2017] (ii) CIT vs Jehangir T. Nagree [2008] 23 SOT 512 (Mum)] There is substantial factual difference in the case of Rajendra Kumar Dwivedi vs. CIT [2012] 26 taxmann.com 84 (All) / [2012] 349 ITR 432 and case under consideration. Though the case was decided on various factual position of that case, Ld. CIT(A) consider it appropriate to mention only one fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur sale deeds dated October 25, 1941, November 15, 1941, June 29, 1942 and November 19, 1942, and after about 5 years it was sold in two lots to the mill, on September 1, 1947 and November 10, 1947. By this transaction, the assessee earned the profit of ₹ 43,887 and odd. On these facts the Tribunal and High Court had found the transaction in question being an adventure in the nature of trade , correctness of which view was challenged before the Hon'ble Supreme Court. The expression adventure in the nature of trade is defined in section 2(4) of the Act, and the Hon'ble Supreme Court considered various judgments of House of Lords and other decisions of the Court of Appeal etc., and then, at page 609 of 35 ITR it was held as under : 12. Then in final concluding para, after recapitulating the relevant facts of the case, it was found, that the purchase was the first step taken by the appellant therein in execution of the well considered plan, to acquire open plots near the mills, and the whole basis for the plan was to sell the said lands to the mills, at a profit, and then the subsequent conduct of the purchaser was considered, and after appreciating the to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uru were not at all considered by Ld. CIT(A). Further to this the Judgement in the case of Ramswaroop Saudagar vs ITO [ITA No 329/JP/2017] is contrary to the judgement of Jurisdictional High Court of Rajasthan in the case of CIT vs Sohan Khan (supra). On the similar facts as were in the case of Ramswaroop Saudagar (supra) Hon ble Rajasthan High Court in the case of CIT vs Sohan Khan (supra) held transaction taxable as capital gain. 16. In view of the above discussion, we can safely conclude that the land was purchased by the assessee since long back as capita asset and was continuously hold by it for 20 years in case of Fateh Royal Residency and for 4-5 years in case of Fateh Hills as capital asset. There was no intention of assessee to trade for the land so purchased, contrary it was used for agricultural purposes continuously till the year of sale. Agricultural income so eraned were offered in the return of income of respective years and accepted by the deptt. Similarly, the Fateh Hills property was acquired long back in the year 2010-11 as capital asset and was so held as capital asset in the balance sheet. Merely conversion of the agricultural land into non-agricultural l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B 33-46 (36-38), 56-66] were produced/ submitted before Ld. AO. Going through such detail your good self will observe that all payment referred therein are not in next year. The submission of the assessee was that payment of multiple invoices was made through one cheque and at different date than of invoice. A detailed chart about the expenditure claimed and payment thereof through bank has been submitted during the assessment proceeding. 19. It is clear from the findings of the ld. CIT(A) that he has totally discarded the observed of the A.O. for non-production of documentary evidence in support of the expenditure. However, in respect of giving this fact, the ld. CIT(A) has allowed on ad hoc basis only 40% of the expenditure so claimed was genuine and incurred for developing the property, therefore, eligible to be allowed as a deduction while computing capital gains on sale of this property amounting to ₹ 43,90,029/-. Accordingly, we do not find any justification in the order of the ld. CIT(A) for sustaining disallowance of 40% against the 50% disallowance made by the A.O., therefore, the A.O. is directed to allow full expenditure so incurred by the assessee amounting ..... X X X X Extracts X X X X X X X X Extracts X X X X
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