TMI Blog2024 (1) TMI 657X X X X Extracts X X X X X X X X Extracts X X X X ..... and interest of the assessee in doing the real estate business. Thus the motive to acquire land was to earn profit through activity of development of the land through his own partnership firm as builder, contractors of the partnership firm also not paid taxes. If the assessee would have done this construction project in his individual capacity, he should have been liable for higher tax and will not have been eligible for claiming exemption u/s. 54F of the Act. Thus the above transaction of the assessee is clearly to evade legitimate taxes due on the profit of the sale of the property. Thus the profit earned by the assessee on sale of land is correctly treated as business income by the Lower Authorities. It is further evident in other co-owner cases, similar reopening of assessments were done and one of the co-owner as against the reassessment order settled the issue under Vivad Se Vishwas Scheme. Decided against assessee. - Smt. Annapurna Gupta, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member For the Assessee : Shri S. N. Divatia, A.R. For the Revenue : `Ms. Saumya Pandey Jain, Sr.D.R. ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axes on the balance capital gains. The assessee being an individual and the Partnership firm is a different entity in the eyes of law, the activity carried out by the assessee in his individual capacity was shown as capital gain and the activity carried out by the partnership firm is shown as business income . Thus the assessee has not entered into any activity which can be termed as adventure in nature and day to day activity with profit motive . The assessee further stated that under the provisions of capital gain also, a person can convert his personal capital assets into stock-in-trade and vice versa. Thus the assessee strongly objected to the proposed treatment of Long Term Capital Gain to business income stating that merely because the assessee is holding same percentage of land as his holding in the Partnership firm. 3.1. The above objection was considered by the Assessing Officer and held that the Partners of the Firm are same as that of the ownership in the land and share of profit of the Firm are the same as that of the land holding. So it clearly proves that the Partnership firm was established to divert the profit, which the stakeholders are expecting from deve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT (90 ITR 255) wherein it is held that no single fact or circumstances has decisive significance and it is totality of the relevant factors and circumstances that has to be take into account for the purpose of determining the true nature of the transaction. The A.O. has applied in the present case only the test of motive or intention but incorrectly, in as much that has to be examined at the time purchase of the asset along with surrounding circumstances. Thus the A.O. failed to discharge the burden to establish that the profit earned in the transaction was in the nature of trade and business and relied upon various case laws. The above arguments were considered by the Ld. CIT(A) and dismissed the plea by passing a detailed order as follows: (i) The appellant and co-partners have sold to the M/s Ashirwad Infrastructure an 29/12/2011 with agreed price of Rs. 9,21,52,500/- for consideration as the cost of land. The property has been purchased by the appellant and co-owners and they got it developed through the firm which is solely owned and managed by appellant and co- owners. The motive to acquire the land was to earn profit through the activity of development of land and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransaction i.e. AY 2012-13, to AY 2015- 16, the appellant become liable for wealth tax if the appellant was treating the same as investment. Since, the appellant has never filed Wealth Tax Return for these periods, it can be easily concluded that the appellant was treating the subject land as Stock-in-Trade . The appellant's intention was never to hold the land as investment. Reliance is placed on decision of Hon'ble Hydrabad ITAT in the case of Vitta Kristappa V/S ITO 92 ITD 1(TM) wherein it is. held as under:- Section 2(13), read with section 263, of the Income-tax Act, 1961- Adventure in nature of trade - Assessment year 1989-90-Assessee individual purchased land from his HUF-He applied to municipalities for approval of lay out plan to convert land into 25 plots and duly paid conversion charges and licence fee and subsequently got approval Assessee incurred expenses on levelling and demarcation and sold 7 out of 25 plots - Assessee filed its return showing capital gains accrued on sale of abovementioned plots assessee submitted that he had purchased land from HUF to set up an oil mill as he had good experience and after purchase of said land, he came to know that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness or incidental to it the nature and quantity of the commodity purchased and resold; any act subsequent to the purchase to improve the quality of the commodity purchased and thereby make it more readily resaleable, any act prior to the purchase showing a design or purpose; the incidents associated with the purchase and resale, the similarity of the transaction to operations usually associated with trade or business; the repetition of the transaction: the element of pride of possession. ) It further observed that in case 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 a relevant factor and unless it is offset by the presence of other factors, it would raise a strong presumption that the transaction is an adventure in the nature of trade The facts in present case as discussed herein above clearly suggest that appellant has acquired the land for carrying out trade and not for investment as appellant has failed to establish that such land was acquired for expansion of its business. 2.8. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und or parameter for determining the genuineness, stands since settled by the apex court in Sumati Dayal v. CIT (1995) 214 ITR 801 (SC) wherein the apex court, in declaring the transaction as non-genuine, discarded a host of documentary evidences filed or relied upon by the assessee-appellant. The case laws cited by the AO in the assessment order(supra) are also quite relevant on this issue and they all strengthen the stand taken by the Department in the instant case. 2.9. As has been discussed above, the AO has proved the intension of the appellant with series of events and development which has taken place regarding the nature of land which has finally resulted into selling in profit at opportune moment. The revenue has also clearly established that right from the beginning; the intension of the appellant was to have motive of maximizing the return from the impugned land. The intension of the appellant was to exploit the uses of land, once it is converted into non agriculture land which appellant wanted to be like that so that it could sell the land at the fantastic price as the prices within a short period of time has skyrocketed. It is very clear from that appellant sold t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppreciate the trans capital asset had not taken place, much-less in this year se entire addition is illegal. It is, therefore, prayed that the addition of Rs. 1,65,87,450/- as business income upheld by the CIT(A) may kindly be deleted. 6. Ld. Counsel Shri S. N. Divetia appearing for the assessee submitted that the Lower Authorities failed to consider fully and properly the fact of the case as well as submissions made by the assessee. The A.O. contention is that the Partnership firm M/s. Ashirwad Infrastructure was established to divert the profits expected from developing the land. The A.O. failed to consider the Partnership firm was a convenient and practical business modal to carry on development work. Since individual co-owners could not develop with the land, building regulation, etc., it would be administrative convenience and smooth operations relating to preparation of plans, marketing of scheme, engagement of labour, procuring raw material and hiring various agencies through the Partnership firm. Thus it was a commercially prudent decision which the A.O. cannot challenge. 6.1. The other contention of the A.O. non-filing of wealth tax returns shows intention to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2010 with the same ratio of the land holding as their partnership shares. The above land was purchased by the co-owners on 02-01-2006 for a consideration of Rs. 6 lakhs and assessee s share is 18%. All the co-owners entered into a development agreement dated 30-11-2011 with their own partnership firm Ashirwad Infrastructure to develop the land into 18 bungalows in the prime location at Thaltej for a consideration of Rs. 9,21,52,500/- and assessee s share is Rs. 1,65,87,450/-. The assessee claimed for the present assessment year LTCG of Rs. 1,26,80,990/- and also claimed exemption u/s. 54F of Rs. 75,16,000/-. It is further seen from the assessment order, the assessee bought another parcel of land for total consideration of Rs. 7.1 crores on 09-09-2014 along with seven other co-owners and constituted another partnership firm namely Sudarshan Developers on 06-05-2014 with the very same set of co-owners as the partners and engaged in the business of land development. This clearly establishes the motive, intention and interest of the assessee in doing the real estate business. Thus the motive to acquire land was to earn profit through activity of development of the land through his own ..... X X X X Extracts X X X X X X X X Extracts X X X X
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