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2015 (8) TMI 986 - HC - Income TaxTransfer of two properties - capital gains v/s income from business - CIT (A) concluded that the two residential bungalows sold would result only in long term capital gain also confirmed by ITAT - Held that - It is not possible to evolve a single test or formula which can be applied in determining whether the transaction was an adventure in the nature of trade. It was also noted that in the case of purchase and sale of land, generally speaking, the original intention of the party in purchasing the property, the magnitude of the transaction of purchase, the nature of the property, the length of its ownership and holding, the conduct and subsequent dealing of the assessee in respect of the property, the manner of its disposal and the frequency and multiplicity of transactions, afford valuable guides in determining whether the assessee is carrying on a trading activity and whether a particular transaction should be stamped with the character of a trading adventure. See CIT v. V.A.Trivedi (1987 (1) TMI 12 - BOMBAY High Court ) Tribunal, as a final fact finding authority has confirmed the findings of fact returned by the CIT (A). While doing so, it did not look at any solitary fact to determine as to whether the transactions in question resulted in capital gains or in business income. Several factors were considered, which included the intention of the assessee in purchasing the property, the length of time the property was kept by the assessee (which in this case is more than fifty years), the lack of any transactions of sale or purchase of property throughout this period of time etc. The CIT (A) as also the Tribunal have examined the case in the correct perspective - Decided in favour of assessee.
Issues:
1. Whether the transfer of properties to individuals resulted in capital gains or business income. Analysis: 1. The appeal by the Revenue under Section 260A of the Income-tax Act, 1961 challenged the Tribunal's decision on the transfer of properties to Mr. Niranjan Koirala and Ms. Sheila Aggarwal. The Revenue contended that the Tribunal incorrectly classified the transfers as capital gains instead of income from business. 2. The facts revealed that the assessee purchased leasehold rights in land in 1952 for dairy farming, which never materialized due to lack of permissions. An MOU for land development was signed in 1989 but was later canceled in 2005. Subsequently, two properties were sold to Mr. Koirala and Ms. Aggarwal. The Revenue argued that these properties were part of the MOU, while the assessee claimed they were excluded. 3. The Assessing Officer initially deemed the transactions as business income, but the CIT (A) overturned this decision. The CIT (A) considered the original intention of the assessee in purchasing the land for dairy farming, the treatment of the land as a fixed asset in the books, and the absence of prior land transactions. Ultimately, the CIT (A) concluded that the transactions resulted in long-term capital gains, not business income. 4. The Revenue appealed to the Income-tax Appellate Tribunal, which upheld the CIT (A)'s decision. The Tribunal's analysis considered various factors, including the intention behind the land purchase, the extended ownership period, and the absence of other land transactions. The Tribunal's findings aligned with the CIT (A)'s conclusions. 5. The High Court, after reviewing the case and relevant legal precedents, concurred with the Tribunal's and CIT (A)'s findings. It emphasized that the determination of whether a transaction constitutes capital gains or business income is fact-specific. The Court noted that no perversity in the findings was identified, and no substantial question of law arose for consideration. 6. In conclusion, the High Court dismissed the appeal, affirming the Tribunal's decision that the transfers of properties to individuals resulted in capital gains, not business income. The Court highlighted the importance of considering all relevant factors in such determinations and upheld the factual findings of the lower authorities.
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