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TMI Blog2012 (3) TMI 325X X X X Extracts X X X X X X X X Extracts X X X X ..... tention of the assessee which would matter in deciding as to whether the property purchased were intended for carrying on business or to hold it as an investment coupled with the line of the business carried on by the assessee - Decided in favor of the assessee - ITA 1258/2010 - - - Dated:- 22-3-2012 - MR. JUSTICE SANJIV KHANNA, MR. JUSTICE R.V.EASWAR, JJ. For Appellant: Mr. Sanjeev Sabharwal, Sr. Standing Counsel. For Respondent: Mr. Manu K. Giri Mr. Anoop Sharma, Advocates. O R D E R This appeal by the Revenue under Section 260A of the Income Tax Act, 1961 (Act, for short) was admitted to hearing vide order dated 30th August, 2010 on the following substantial question of law: Whether in the facts and circumstances of the present case, the ITAT is justified to hold the assessee s claim of deduction as bad debt of Rs.44,28,000/- being allowable as business loss instead of holding by Assessing Officer as capital loss? 2. The respondent-assessee is a company and the assessment year in question is 2004-05. In the said year, the assessee had declared income of Rs.2,62,34,270/- in the return filed on 12th September, 2004. In the assessment order dated 29th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... state Ltd., which was desirous of building a designer house complex having a number of dwelling units of various sizes and specifications, common facilities, provision of private electricity and water supplies, club, shopping centre etc. and in pursuance thereto they were building dwelling units of different sizes and specifications. The assessee was desirous of purchasing the dwelling units being constructed by M/s. Gulmohar Estate Ltd. The assessee entered into similar type of three agreements to purchase of following properties:- (i) Property measuring 700 square feet for consideration of 11,47,500; (ii) Property measuring of 1960 square feet for consideration of Rs.13,23,000/-; (iii) Property measuring 2900 square feet for Rs.19,57,500/-. 16. The assessee, thus, agreed to purchase three number of dwelling units in designer housing complex being constructed by M/s. Gulmohar Estate Ltd. The assessee is not an individual so these flats could be considered with intent to use them for own residential purposes. It is not in dispute that the assessee is also in the business of constructing and developing buildings. In the balance sheet as on 31.03.1989, 31.03.1990 and thereaft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eloping, or assist in developing and pereparing land for building purposes and preparing building sites by planting, paving, drawing and by constructing, reconstructing pulling down, altering, improving, decorating, furnishing and maintaining and dealing in offices, flats, service flats, houses, bungalows, factories, warehouses, shops, cinema houses, bungalows, works and conveniences of all kinds and by consolidating or connecting or sub-dividing properties and by leasing, letting or renting, selling and otherwise disposing of the same on such terms and conditions as may be though fit. 3(b) To undertake building and structural construction works of all kinds and to work as builders, contractors, sub-contractors, and to sub-let all or any contracts from time to time and upon such terms and conditions as may be thought expedient. 3(c) To carry on the business as estate agents for buildings, land and other property and to arrange or undertake the sale and purchase of, assist in selling or purchasing lands, buildings, and other property whether belonging to the Company or not and to let any portion of any premises for residential, trade or business purposes, and to collect rents, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate Pvt. Ltd would be considered to be made as incidental to the business carried on by the assessee. 5. Learned counsel for the Revenue has submitted that in the end of paragraph 18 the tribunal has drawn an assumption without any basis that the intended purchase was in the course of business or at best the purchase was for a residence of its employees, including directors. We are not impressed by the aforesaid contention. The tribunal has referred to the nature of activities undertaken by the respondent-assessee,i.e., the assessee was a real estate company and was a contractor. The tribunal referred to the Memorandum of Association and mentioned other transactions of sale/purchase in which the assessee had treated immovable properties as stock in trade. The history for the business transactions undertaken by the assessee have been kept in mind. No doubt, the assessee also had rental income but this factum alone does not show and establish that the properties, which were being purchased from M/s Gulmohar Estate Limited, were to be treated as investment and not for the purpose of stock in trade. The tribunal thereafter in paragraphs 19 and 20 has observed as under:- 19. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sesse, who is also in the business of construction and sale of flats/properties/housing complex, is on investment account or on trading account is to determined in the light of the intention of the assessee to be decided upon on facts and surrounding circumstances relating to the given property in question No uniform or abstract test can be applied to all the transactions carried on by any assessee. It depends on facts and circumstances of any given transaction. We, therefore, have to decide the controversy in the light of the facts relating to the property in question and the intention of the assessee with regard to that property. In the light of the facts relating to the transaction in question, we have already observed above that the transaction to purchase property from M/s. Gulmohar Estate Ltd. was related or incidental to the assessee s business. After taking into account the intention of the assessee, it is well settled that it is the intention of the assessee which would matter in deciding as to whether the property purchased were intended for carrying on business or to hold it as an investment coupled with the line of the business carried on by the assessee. In the present ..... X X X X Extracts X X X X X X X X Extracts X X X X
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