TMI Blog2022 (4) TMI 447X X X X Extracts X X X X X X X X Extracts X X X X ..... e, a building and the land appurtenant thereto held by an assessee, could be transferred together to a transferee through a single conveyance deed against a lumpsum monetary consideration. In such cases, the question on the method of computing the long term capital gains arises (i.e.) whether the long term capital gain/short term capital gain could be computed for land and building separately? This question assumes paramount importance since the period of holding will decide whether the capital gain is long term or shorter and the indexed cost of acquisition and improvement thereto in respect of these assets will vary depending upon the period of holding. In order to claim the capital gains separately for land and building, the assessee is required to give basic details like the original cost of acquisition of land and building, the year acquisition etc separately duly supported by necessary documentary evidences as they may be required at the time of scrutiny assessment. Based on the holding period of these assets, the capital gain is long term or short term and the indexed cost of acquisition could be computed. Likewise in order to claim the indexed cost of improvement necessa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this appeal is as to whether the Revenue authorities were justified in holding that the assessee is entitled to deduction under section 54F of the Act on the long-term capital gain on sale of property of the assessee under Joint Development Agreement (JDA) as against the claim of the Revenue that the income in question has to be assessed under the head Income from Business . The following are the grounds of appeal raised by the Revenue: 1. The order of the Learned CIT (Appeals), in so far as it is prejudicial to the interest of revenue, is opposed to law and the facts and circumstances of the case. 2. On the facts and in the circumstances of the case and in law, is the Ld. CIT(A) justified in deleting the disallowance of the deduction claimed under section 54F of the Income Tax Act, 1961 for an amount of ₹ 4,48,10,155/- on the ground that nature of transaction in the instant case attracts capital gains and not business income. 3. On the facts and in the circumstances of the case and in law, is the Ld. CIT(A) justified in holding that the assessee did not exploit the asset for commercial benefit ignoring the fact that the Joint Development Agreement was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a had 30% of share in the property. 4. During the relevant previous year, the assessee sold the following flats and received the following sale consideration: S.No Flat No Date of Sale Amount of Income Recognized 1 510-B 09-May14 50,22,000 2 302-B 04-Apr-14 70,00,000 3 401-B 12-Mar-15 92,61,702 4 506-A 06-Feb-15 87,37,000 5 408-A 26-Sep-14 86,54,193 6 611-A 09-May-14 63,13,436 7 412-A 04-Apr-14 50,00,720 8 312-A 21-Jun-14 46,89,788 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the business of the assessee and therefore income derived from sale of assessee s share of built-up area which the assessee was to receive under the JDA had to be regarded as income from business. The CIT(A) however took the view that income from sale of built-up area has to be regarded as Capital Gain . The following were the relevant findings of the CIT(A): In the light of the above facts and circumstances and the case laws discussed, it is seen that the appellant invested in the land together with another co-owner and after holding the same for 5 1/2 years without doing anything, given it for joint development to unconnected party and upon receipt of the proportionate agreed super built up area in the form of constructed flats, he has sold the same for re-investing in a single residential unit which is in a better location for self occupation. From all the above, it is clear that the appellant had intention to settle down to acquire a proper residence for himself. There is no such intention to carry out commercial activity in the whole transaction, as alleged by the AO. The action of the appellant by which the appellant formed a partnership firm with the co-owner an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en from the definition in section 2(13) which defines business to include any trade, commerce or manufacture or any adventure in the nature of trade, commerce or manufacture. Likewise, profession has also been defined in section 2(36) to include vocation. Thus, the definitions being inclusive in nature, should be construed as being extensive and not limited in scope to only that which is specified in or by the words of the definition. The definition of business includes within its scope specifically and explicitly every adventure in the nature of trade, commerce or manufacture. Even an isolated transaction may constitute an adventure in the nature of trade and would be liable to be construed as business carried on. To constitute business or an adventure in the nature of trade it is not, therefore, essential that in every case there must be a series of transactions all motivated by commercial and profit making considerations nor is it essential that the transactions must fructify and materialise in every case into a full-fledged business through the running of an establishment for carrying on business or industry. 11. In the case of G. Venkataswami Naidu Vs. CIT (1959) 35 ITR 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommodity in which people will trade and that decision rendered several decades ago will no longer be valid in the context of present times when land is a commodity regularly traded. Though there is force in this argument of the learned DR, we have to see all the cumulative circumstance and in particular intention at the time of purchase of the property and probably this factor would may weigh more than the fact that land in the present times is regarded as a commodity regularly traded. 15. The learned counsel for assessee contended that the single or isolated transaction of entering into a JDA to acquire immovable property cannot be regarded as adventure in the nature of trade. In this regard the assessee pointed out that the assessee had never indulged in any transactions in the past and the intention at the time of acquisition of the property in question was not to sell the same as an adventure in the nature of trade. In this regard it was reiterated that when the property was purchased on 28.3.2005 by the co-owners, there was no partnership envisaged by the two co-owners who purchased the property. On 31.3.2006 the two co-owners and two others entered into a partnership dee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and entering into JDA. Another test laid down by the Hon'ble Supreme Court in the decision of G. Venkataswami Naidu (supra) is to see as to, what is the nature of the commodity purchased and resold and in what quantity was it purchased and resold? If the commodity purchased is generally the subject-matter of trade, and if it is purchased in very large quantities, it would tend to eliminate the possibility of investment for personal use, possession or enjoyment. Did the purchaser by any act subsequent to the purchase improve the quality of the commodity purchased and thereby made it more readily resaleable? Applying the aforesaid test, we are of the view that entering into JDA, is not a common subject matter of trade. We are of the view that no other facts or circumstances are brought on record to show that the assessee indulged in an Adventure in the nature of trade when he entered into the JDA. We therefore uphold the order of the CIT(A) on this aspect. 17. The learned DR submitted that when the assessee sold his share of flats obtained under the JDA, there would arise an incident of short-term capital gain as the flats so acquired were held by the assessee for less tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndivided share of land proportionate to the built-up area which falls to the share of the developer is agreed to be sold. Therefore, the owner of the property retains undivided share of land proportionate to his share of built-up area. When the built-up area is delivered to the owner of the land and when he sells his share, he again transfers not only the built-up area but also proportionate undivided share of land. In such transaction, there will be no bifurcation of cost of land and building. The AO has to call for details and arrive at the cost of undivided share of land and built-up area. When the owner sells his share of built-up area, the built-up area is acquired when the developer delivers possession of the built-up area to the owner but the undivided share of land is already owned by the owner. When an owner sells his share of property under a JDA he sells two components one is undivided share of land which he held for a longer period than the building and the building which he gets from the developer on completion of the building and the period of holding of the building is much shorter than the period of holding of the land. The concept of bifurcation of undivided share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess than the value adopted or assessed or assessable by an authority of the State Government for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed or assessable shall be deemed to be the full value of consideration received or accruing as a result of such transfer for computing capital gains. In all the registered conveyance deeds, wherein transfer of land and building is involved, an Annexure is appended or there are documents wherein the market values are furnished for the land and the building separately for the purpose of stamp duty valuation. The market value of the immovable property transferred as indicated in the sale deed will be equivalent to the actual sale consideration received by the transferor from the transferee. If this value exceeds the value adopted or assessable by the Registration Authority for stamp duty purposes, the said sale consideration as appropriated to land and building as per Annexure or other documents attached with the registered sale deed could be adopted for the purpose of computing the capital gains. If the sale consideration is lesser than the value adopted or assessable by the Registration Author ..... X X X X Extracts X X X X X X X X Extracts X X X X
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