9911796707
TMI Blog2000 (10) TMI 203X X X X Extracts X X X X X X X X Extracts X X X X ..... the land came to the assessee as an asset on the dissolution of the said firm. 3. The said land was sub-divided into plots Approval of the lay-out plan from the Collector, Kolhapur, was obtained on 2-12-1974. There were in all 48 plots. Out of these, 21 plots were sold by the assessee during the period under consideration. In respect of the sale of these plots, the assessee had shown income under the head 'Capital gains'. The Assessing Officer, however, was of the opinion that the entire activity of the assessee was an adventure in the nature of trade and, accordingly, the profit on the sale of land was treated as income from business. 4. In arriving at the above conclusion, the Assessing Officer took into consideration the following aspects of the transaction: (1) The land purchased was divided into plots as per the lay-out plan approved by the Collector of Kolhapur vide their order No. LMA/SR/115, dated 2-12-1974. (2) The land under consideration was not an agricultural land. (3) The land was not required by the firm, in which the assessee was a partner for its business. (4) The land was a trading asset of the firm and was not a capital asset. (5) The taxes paid i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of P.M. Mohammed Meerakhan v. CIT [1969] 73 ITR 735. 7. Shri M.K Kulkarni, the learned counsel for the assessee, submitted that the assessee firm's business is that of trading of tobacco and tobacco bye products and the firm had no intention whatsoever to exploit this land for profit purposes. The firm had all the while regarded the investment as 'capital investment'. The said investment continued to be 'capital investment' upto 6-1-1984 (date of dissolution of the firm) and even thereafter in the books of the assessee upto assessment year 1989-90, whereafter 21 plots out of total 48 plots were sold in the assessment year 1990-91. In this connection, he drew our attention to the balance sheets of the relevant years placed in the paper book. The learned counsel submitted that the land was originally acquired by the firm on 13-1-1975 and there is nothing to show that when it was purchased it was with an intention to resell it at profit. The property had been held by the firm for over 9 years and thereafter, on dissolution of the firm the assessee got the land as a capital asset and kept it as such for more than 6 years. He submitted that the assessee had never sold any property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purchaser which is to be taken into consideration and taking into consideration the totality of circumstances, the authorities below were justified in holding that the assessee indulged in the activity in the nature of trade and accordingly, the entire profit on the sale of plots is to be assessed as business income and not as capital gains as shown by the assessee. 9. We have considered the rival submissions and perused the facts on record. The test for determining whether a transaction was an adventure in the nature of trade has been laid down by the Hon'ble Supreme Court in the case of Janki Ram Bahadur Ram v. CIT [1965] 57 ITR 21. It was held that the fact that the assessee had a profitable bargain when he purchased the property and that he had a desire to sell the property if a favourable offer was forthcoming could not, without other circumstances, justify an inference that the assessee intended by purchasing the property to start a venture in the nature of trade. From the facts of the case, it is evident that the land under consideration was purchased by the erstwhile firm of Shah Vallabhadas Hiralal on 13-1-1975. The firm continued to show the land as capital asset i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition was assessable as business income, because the assessee was a dealer in land and also because he had obtained permission from the Collector to put the lands in question to non-agricultural use. On reference, the Hon'ble High Court held that the approach of the Tribunal was erroneous. The fact that the assessee had retained the lands till they were acquired by the Government showed that his intention was not to treat these lands as his stock-in-trade. The compensation received by him was not therefore assessable as his business income. The Hon'ble High Court laid following proposition: "The legal position is not capable of being disputed that stock-in-trade of a joint family or a firm when allotted to a member on partition or dissolution, would become capital asset in his hands, and the subsequent sale by him would result into capital gains, unless there is evidence to show that the member of partner receiving the property as his share treated it as his stock-in-trade." The case of the assessee is on a better footing. He is not a dealer in land nor the erstwhile firm of which he was a partner was a dealer in land. The firm purchased the land out of its surplus funds and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the authorities below and direct the Assessing Officer to treat the profit on the sale of 21 plots under the head 'long term capital gains'. 14. In IT Appeal No. 757 Pune 1993, the grievance of the Revenue is that the learned CIT(A) is not justified in directing the Assessing Officer to adopt the value of sales as per transfer documents for determining the profit on sale of land. As discussed in the assessee's appeal, the assessee during the year under appeal sold 21 plots. The cost of consideration shown in the Deed of Conveyance was less than the value fixed by the Sub-Registrar for the purpose of payment of stamp duty. Thus, there was a difference between the amount shown as consideration in the Conveyance Deed and the value fixed by the Sub-Registrar for the purpose of stamp duty. The Assessing Officer was of the opinion that the value fixed by the Sub-Registrar was the market value of the plots sold by the assessee and he accordingly worked out the profit by adopting the value as fixed by the Sub-Registrar for the purpose of stamp duty. 15. On appeal, the CIT(A) held that the Assessing Officer had not brought on record any other evidence, other than the value fixed by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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