2017 (7) TMI 739 - HC - Income Tax

Income from the sale of flat - Business income or capital gain - Held that - As far as the flat is concerned, the same is acquired in the year 1941 and was held as such since then. It appears that in the year 1984-85, construction permission was obtained by the Assessee. However, the same was abandoned. Even the amount received from the prospective buyers were returned and some who did not come forward to receive the amount, such amount is reflected in the account. The commercial activity which was sought to be undertaken in the year 1984-85 never took of and had to be abandoned because of the order of the Bombay High Court and the commencement certificate was also revoked. Totality of the facts as were discussed by the Commissioner (Appeals) and the Tribunal would show that no error has been committed in treating the income from the sale of flat as long term capital gain. Sale of hoarding, parking and cable video charges - Held that - As observed that for last 40 years, the same is being shown as business income and the Assessee for all the previous years has accepted the same as business income. There was no reason to deviate for the present year. The evidence in this regard has also been discussed by the Tribunal. Even in respect of trade in bullion, the Assessing Officer for all the previous year has accepted that the Assessee is engaged in business of trading in bullion.

Summary

Issues:
1. Classification of income from hoarding charges, compensation, lease rent, parking charges, and sale of silver as 'Business Income'.
2. Treatment of sale of land as Long Term Capital Gain and allowance of deduction u/s.54EC of the Act.

Analysis:

Issue 1:
The appeal raised substantial questions of law regarding the classification of various incomes as 'Business Income'. The Appellant contended that the Tribunal erred in considering income from hoarding charges, parking charges, and the sale of silver as rent, not business income. The Appellant argued that the lease agreements for erecting towers should be treated as house rent, not business income. Additionally, the Appellant claimed that the sale of a flat with construction permission should be classified as business income, not long term capital gain. The Appellant emphasized that even a solitary transaction can constitute a business transaction, and the circumstances surrounding the sale supported this assertion.

Issue 2:
Regarding the sale of land, the Appellant argued that the construction permission obtained in 2004 should constitute business income, not long term capital gain. However, the Court noted that the construction permission obtained in 1984-85 was abandoned, and the commercial activity did not materialize due to legal issues. The Commissioner (Appeals) and the Tribunal found no error in treating the income from the sale of the flat as long term capital gain. The Court upheld the classification of income from hoarding, parking, and cable video charges as business income based on historical treatment and evidence presented. Similarly, the trade in bullion was accepted as a business activity by the Assessing Officer in previous years. The Court found no perversity in the appreciation of facts by the lower authorities, leading to the dismissal of the appeal.

In conclusion, the High Court of Bombay upheld the classification of income from various sources as 'Business Income' and the treatment of the sale of land as Long Term Capital Gain, dismissing the appeal with no costs.