9911796707
TMI Blog2023 (8) TMI 287X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumstances of the case and considering the details and evidences furnished, order passed by AO being neither erroneous nor prejudicial to interest of revenue, PR.CIT erred in revising the said Order. It be so held now. 2. The learned Principal CIT further grievously erred in law and on facts in not appreciating the submissions made to him that land was held as Investment since inception and so declared in the Balance sheet at cost as also, the same was acquired from own capital and held for long period which established the intention to treat the same as Capital asset and not intention to engage in trade or business. It be so held now and Order passed u/s 263 be set aside. 3. The ld Principal CIT further erred both in law and on facts in not appreciating the various factors leading to the conclusion that the land was never sold as trading asset and there was no adventure as alleged by him when the gain on sale of a part of land held in past was also accepted as Capital Gain. There being no material or different facts, the order passed by ld AO after due application of mind taking a correct view could not be treated as prejudicial to interest of revenue. It be so held now and o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pose in 2010-11. After converting the entire 3753 sq. mtrs agricultural land into non-agricultural purpose (N.A Land), the assessee have sold 2150 sq. mtr land in 2016-17 for Rs. 2,20,11,600/- in order to earn profit from business activity. After claiming exemption benefit of section 54EC of Rs. 43,00,000/-, the assessee has offered capital gain on Rs. 1,67,44,655/-. Thus, the assessee has treated the said NA land as capital Assets instead of Business Asset and offered the gain as Long Term Capital Gain instead of showing it as business income. This is the precis controversy in this case. Further, on perusal of the Balance Sheet, it is noticed that in fixed assets schedule, the assessee has shown various investments in lands and plots too. This proves that assessee is engaged in regular purchase sale activity in lands. Hence, facts of this are sufficient to prove that assessee is engaged in business activity. In view of the above facts, the sale of land and the profit earned therefrom should have been taxed treating the same as business income instead of Long Term Capital Gains claimed by the assessee. However, the then AO failed to treat the above transaction and profit earned the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome on sale of NA land 2150 sq. mtr. out of the 3753 sq. mtr. for a consideration of Rs. 2,20,11,600/- falling under FP 50 Block No 481 at Village-Kudasan Tal-Gandhinagar, be treated as business income instead of capital gain as claimed in the return of income filed. In connection with the above the assessee most respectfully submit their argument and justification along with documentary evidences to support their claim as under; That assessee is a senior citizen having income from House property (Rent income) and income from other sources only since last 10 years and more. That assessee has purchased said agriculture land with other co-owners in FY 2006-07 Le. almost 10 years back for the sole purpose of the investment only. It can also ascertained from the books of accounts that the said land along with other land reflected as investment in land under the head "Fixed Assets" in the Balance Sheet and not as "stock in trade" right from the year of purchase to till date. Later on the said land was converted into NA land with appropriate authorities in the year 2010-11 i.e. almost after 5 years from the year of purchase and even after approval of NA the land was held as inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also like to explain here that source of income of the assessee as filed in the ITR since last 10 years and more was from "Rent income" and "Income from other sources" only. We are enclosing here with copy of ITR filed along with computation of income to the extent available which justified that intention of the assessee is never to engage in trade or business. From the various circumstances and facts as narrated above including the number and magnitude of transactions, the period of holding and the manner of accounting it is conclude that the assessee has rightly claimed the income from the sale of land under head capital gain and also AO has rightly passed the order after carefully verification of the document, explanation and facts produced at the time of assessment proceeding. So the order passed by the Ld.AO is not erroneous and prejudicial to the interest of the revenue. Your honour is requested to kindly accept the above justification with documentary evidences to support the claim of the assessee positively and not to treat the income from sale of land as business income. However if your honour has different views than the above it is requested to provide the same wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t or suffer any loss. The assessee may be making entries which are not in conformity with the proper principles of accounting, conceal profit or show loss and the entries are made by him cannot therefore, be regarded as conclusive one way or the other. What is necessary to be considered is the true nature of the transactions and whether infact it has resulted in profit or loss to the assessee. As such, the mere diversion between accounting records and the tax treatment cannot lead to any conclusion as to the treatment thereof as has been empathical, judicially affirmed in the cited cases. 6.2 The argument which is often taken as also by the assessee that there should be regularity of transaction and assessee regularly engaged in the business activity then only such transaction can be treated as business or adventure in trade. On this issue it would be relevant to refer to certain Supreme Court decisions which have clearly held that "Single plunge in the waters of trade may partake of the character of an adventure in the nature of trade. The relevant part of decision are reproduced herebelow: "In the case of G Venkataswami Naidu & Co. v. CIT [1959] 35 ITR 594 (SC), it was held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntion of conducting business in the transaction of land. 6. We are not in agreement with the ld. PCIT on this score. The nature of a transaction, whether by way of adventure in the nature of trade, is determined not by a solitary factor but by considering a number of factors together, all pointing to the intention of the assessee in undertaking the transactions. The Hon'ble apex court in the case of Venkataswamy Niadu v CIT 35 ITR 594 (SC) explained the purport of the term "adventure in the nature of trade" as having some but not all characteristics of trade or business, as under: " When section 2(4) refers to an adventure in the nature of trade, it clearly suggests that the transaction cannot properly be regarded as trade or business. It is allied to transactions that constitute trade or business but may not be trade or business itself. It is characterised by some of the essential features that make up trade or business but not by all of them; and so, even an isolated and single transaction can satisfy the description of an adventure in the nature of trade. But at least some of the essential features of trade must be present in the isolated or single transaction." 7. The Hon'b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... factor against the contention that the transaction is in the nature of trade. The presence of all the relevant circumstances may help the court to draw a inference as to whether a transaction is in the nature of trade, but it is not a matter of merely counting the number of facts and circumstances pro and con; it is important to consider their distinctive character. In each case, it is the total effect of all relevant factors and circumstances that determines the character of the transaction. 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 offset by the presence of other factors it would raise a strong presumption t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y one factor relating to the land sold, his inference that the land sold by way of adventure in the nature of business, we hold, is not appropriate. 9. The other facts noted by the Ld. PCIT for arriving at his finding of the transaction of sale of land being in the nature of adventure in trade we find are entirely irrelevant and do not have any bearing on the finding. We fail to understand how the fact that the firms in which assessee was a partner indulged in real estate transactions can lead to the inference that the assessee in his individual capacity was also intended indulging in such business. For that matter the assessee's affidavit in proceedings before the Civil Court stating that he and his son were involved in real estate business also is of no relevance and consequence since the entire affidavit is not reproduced in the order and until it is read in entirety the import of it cannot be gathered. The Ld. PCIT's reference to the contents of the affidavit can only be treated as his inference from the same and the affidavit could very well be also read to have been stated by the assessee in the context of the fact that he was indulging in real estate business in partnership ..... X X X X Extracts X X X X X X X X Extracts X X X X
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