TMI Blog2022 (5) TMI 1214X X X X Extracts X X X X X X X X Extracts X X X X ..... nts earn commission income, which the assessee has never earned throughout his professional career though he claims to be a real estate broker. It is common for a real estate agent to maintain office, cash book, bank book, ledger accounts, vouchers, bills, copy of bank statements etc. which are all missing in the instant set of facts, which leads to the inescapable conclusion that the assessee is not a real estate agent. Whether the assessee can be said to have engaged in adventure in the nature of trade ? - As the assessee has engaged in the transaction to make profit, although the transaction was entered into at the request of his employer, SPIL. Hence, from an analysis of facts, it is apparent that the assessee has entered into a transaction with the intent to sell land at a profit by undertaking the necessary steps to convert their land use from non-agricultural to agricultural, which in our considered view would qualify as an adventure in the nature of trade . We are of the considered view that the transaction undertaken qualifies as adventure in the nature of trade and hence provisions of section 50C would not apply to the instant set of facts. We therefore hold t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dustries Limited (SPIL) and earned income from salary, income from business and income from other sources. SPIL was considering to acquire a piece of land adjacent to their factory in Halol and it requested the assessee to facilitate the transaction. Accordingly, the assessee purchased four pieces of land in Halol in AY 2008-09 for a consideration of Rs. 23,37,817/- and after converting them into one single land and converting its use from agricultural to non-agricultural, sold the land to Sun Pharmaceuticals Limited for a consideration of Rs. 36,50,001/- in AY 2009- 10. SPIL also arranged for loan to the assessee from M/s Quality Investments Pvt. Ltd., a group entity, to effectuate the above transaction. The net profit of Rs. 4,08,184/- after claiming expenses was offered to tax as business income by the assessee in its return of income. In his statement recorded u/s 131 of the Act, the assessee submitted that he is doing part time business as real estate agent outside of office hours and hence sale of land qualifies as business income. The Ld. AO rejected assessee s argument that he is engaged in the business of real estate agent and treated the transfer of sale of land as transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r enjoying it, it would be a strong presumption that the transaction is an adventure in the nature of trade . In the present set of facts, the transaction was entered with an intention to resell at a profit and hence income qualifies business income . The assessee relied upon various case laws in support of his contention. The Ld. CIT(A) accepted assessee s contention and held that income qualifies as business income and accordingly, provisions of section 50C cannot be applied. While allowing the assessee s appeal, the Ld. CIT(A) observed as under: I have considered the facts of the case as well as the observation of the AO and the arguments put forth by the AR of the appellant, From the documents filed before the undersigned, it is seen that as per agreement dated 15.09.2007 between Sun Pharmaceutical Industries Ltd (SPIL) and the appellant, the appellant purchased certain agricultural lands adjacent to the factory premises of the company and after getting various clearances for non agricultural use, the lands were transferred to the SPIL. The finances for the transaction were provided by M/s Quality Investment Pvt. Ltd. which was a company of the promoter group holding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .T.Act,1961 cannot be applied to it. This conclusion is supported by various case laws cited by the Appellant. In view of this, the action of the AO in adopting full value of consideration at Rs.4,39,29,600/-, being the jantri value of the property is hereby quashed, The AO is directed to adopt sale consideration at. Rs.36,50,001/- as recorded in the sale agreement. 5. Regarding interest expenditure of Rs. 4,26,000/- and set-off of loss of Rs. 1,24,283/- the Ld. CIT(A) allowed the relief to the assessee by holding as under: I have considered the facts of the case as well as the observation of the AO and the arguments put forth by the AR of the appellant. Since the transaction of sale of land is held to be adventure in nature of trade, the appellant is eligible to claim all the expenses related to the transactions which are supported by necessary evidences. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx So far interest payment of Rs.4,26,000/~ is concerned, it is seen from the assessment order that the appellant had taken a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apply. The assessee bought 4 pieces of land, converted them from agricultural to non-agricultural and sold back the same to SPIL for a profit, which was duly reflected as business income in the return of income. The intention at the time of purchase of land was resale to SPIL i.e. to earn profits and hence the transaction qualifies as adventure in the nature of trade . The assessee is a real estate broker and vide letter dated 15/09/2007 issued to the assessee by SPIL, he was engaged to carry out a business transaction by SPIL since assessee s firm was engaged in real estate broking. The Ld. Counsel for the assessee drew our attention to page 34 of the Paper-Book to show that the land in question was treated as stock-intrade in his books of accounts and hence income earned from sale thereof qualifies as business income . The Ld. Counsel for the assessee relied on Supreme Court decision in the case of of G. Venkataswami Naidu Co. v. CIT 35 ITR 594 (SC) to contend that if an asset is bought with a predetermination to sell it at a profit, it will qualify as a business transaction. The assessee took unsecured loan from SPIL s group entity on which interest was also paid in ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tantiate that the assessee is real estate agent, when the totality of facts gives a different picture. The assessee s real estate business did not have a Firm Name, Proprietorship Name or business address, from where he has been conducting business after office hours. The assessee has not mentioned anything about his Firm name in the return of income nor is the Firm name mentioned in the letter dated 15/09/2007 addressed by SPIL to the assessee. Also, it is a commonly known facts that real estate agents normally earn commission on purchase and sale of land and not business income on sale of entire property, which again supports the view that the assessee is not a real estate agent. Further, for a real estate agent, it is not common to buy the piece of land in his own name and then selling the same to his own employer. Rather, real estate agents earn commission income, which the assessee has never earned throughout his professional career though he claims to be a real estate broker. It is common for a real estate agent to maintain office, cash book, bank book, ledger accounts, vouchers, bills, copy of bank statements etc. which are all missing in the instant set of facts, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchase clearly showed that it was not interested in obtaining any return from them. No doubt the appellant sought to explain its purpose on the ground that it wanted to build tenements for the employees of the mills; but it had taken no steps in that behalf for the whole of the period during which the plots remained in its possession. Besides, it could not be assumed in the case of a firm like the appellant that the acquisition of the open plots could involve any pride of possession to the purchaser. It was really not one transaction of purchase and resale. It was a series of four transactions undertaken in pursuance of a scheme and it was after the appellant had consolidated its holding that at a convenient time it sold the lands in two lots. When the Tribunal found that, as the managing agent of the mills, the appellant was in a position to influence the mills to purchase its properties its view could not be challenged as unreasonable. If the property had been purchased by the appellant as a matter of investment it would have tried either to cultivate the land, or to build on it; but the appellant did neither and just allowed the property to remain unutilised except for the net ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be taxed as business income. 10.4 Now, in the facts of the present case, the assessee bought four plots of land, consolidated the same into a single plot, converted their use from agricultural to non-agricultural and sold the same to SPIL at a profit. It is evident from contents of letter dated 15-09-2007, that the intention at the time of purchase of land was to sell the same to SPIL at a profit, and assessee has no intention to hold the land as an investment or utilize for any other purpose. In our view, the case is directly covered by facts in the case of G. Venkataswami Naidu Co. v. CIT 35 ITR 594 (SC) and also Pune ITAT in the case of Dilip Battu Karanjule v. ITO [2016] 74 taxmann.com 12 (Pune - Trib.) wherein on identical facts, the Courts held that the intention at the time of purchase has to be seen and if the intention at the time of purchase was to sell land at a profit the transaction would qualify as adventure in the nature of trade . In the instant facts. the assessee took an interest-bearing unsecured loan (which was arranged by SPIL) to give effect to the transaction. The assessee did not make any improvements to the land and as soon the land use was conver ..... X X X X Extracts X X X X X X X X Extracts X X X X
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