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TMI Blog2012 (5) TMI 145X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of section 50C are not applicable with respect of sale of land as sale of land was not capital asset - against revenue. - INCOME TAX APPEAL DEFECTIVE No. - 1 of 2012 - - - Dated:- 9-4-2012 - Ashok Bhushan, Prakash Krishna, JJ. Petitioner Counsel :- Shambhu Chopra Respondent Counsel :- S.D.Singh (Delivered by Prakash Krishna, J.) The above appeal has been preferred under section 260A of the Income Tax Act and is directed against the judgement and order dated 19th of August, 2011 passed by the Income Tax Appellate Tribunal, Lucknow Bench B, Lucknow in ITA No.288/LKW/2011. The dispute relates to the assessment year 2006-2007. In the memo of appeal, the following substantial questions of law have been proposed:- 1. "Whether on the facts and the circumstances of the case, the Tribunal was correct in not appreciating the fact that the assessee has sold capital asset (land) and not stock in trade. 2. Whether on the facts and in the circumstances of the case, the Tribunal was correct in not appreciating the fact that the provisions of section 50C are applicable against the sale of land (Capital Asset). 3. Whether on the facts and the circumst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee in this regard and held that the provisions of section 50C could not be invoked on the facts of the present case. The Revenue carried the matter in further appeal before the Income Tax Appellate Tribunal, Lucknow Bench, Lucknow in ITA No.288/LKW/2011, unsuccessfully. Endorsing the findings of the First Appellate Court, the Tribunal held that Section 50C of the Act would have no application where transfer of immovable property is on account of sale of stock in trade income. Such income is computed under the head income from business. It has been found that there is no contrary material on record to controvert the contention of the assessee that the plots of land sold were held by the assessee as stock in trade. Questioning the legality and validity of the aforestated two orders the Revenue has filed the present appeal on the questions reproduced in the earlier part of the judgment. Heard Sri Shambhu Chopra, learned counsel for the department, in support of the appeal and Sri S.D. Singh for the assessee company. Reiterating the stand of the Assessing Officer as mentioned in the assessment order the learned counsel for the Revenue disputes the correctness of the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntrovert this contention of the assessee that the plots of land sold were held by the assessee company as stock in trade." This finding in our considered opinion is sufficient to dispose of the appeal. However, it is desirable to consider the various judicial pronouncements cited by the learned counsel for the parties to bring home the point in their favour. To begin with, it is apt to notice the Apex Court's judgment in Venkataswami Naidu Co (G.) Vs. Commissioner of Income-tax, (1959) 35 ITR 594, a decision relied upon by the learned counsel for the assessee. It has been laid down that it is impossible to evolve any formula which can be applied in determining the character of isolated transaction which comes before courts in tax proceeding, it would not be expedient to make any attempt to evolve such a rule or formula. Generally, there would not be difficulty to decide whether a given transaction is an adventure in the nature of trade or not but there are cases where the line of distinction is thin. Several factors are to be taken into account to come to a definite conclusion for determining the character of transaction such as (1) the nature of commodity purchased and r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommodity, subsequent dealings and the manner of disposal may be such that the transaction may be stamped with a character of a trading venture. But a transaction of purchase of land cannot be assumed without more to be a venture in the nature of trade. The decision was rendered at a time when the capital gains were not taxable under the Income-tax Act. In the above background it was observed that it is for the Revenue to establish that the profit earned in a transaction is within the taxing provision and is on that account liable to be taxed as income. It was further observed that the profit motive in entering a transaction is not decisive, for an accretion to capital does not become taxable income merely because an asset was acquired in the expectation that it may be sold at a profit. It was a case of single transaction of purchase of a jute pressing factory by the assessee who was dealing in scrap. Subsequently, the said pressing factory was sold and sale transaction was held by the Apex Court as capital receipt. In view of the finding that there is nothing to show that the assessee desired to controvert the property into some other use. The assessee also did not employ any w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Gold Deposit Scheme, 1999 notified by the Central Government;]" Section 50C also uses the word "capital asset." For applicability of section 50C one of the essential requirements is that an asset should be capital asset. From the ratio of the various judicial pronouncements referred to above, it can be culled out that whether sale of land is sale of capital asset or stock in trade is essentially a question of fact. There is no rule of thumb to address the said issue. Several principles have been evolved in the judicial decisions, but although are more in the nature of guidelines. The question has to be answered in each case having regard to the circumstances of that case. There may be factors both for and against a particular point of view. The Court has to answer the question on a consideration of all of them in a process of evolution. The inference has to be drawn on a cumulative consideration. Coming to the facts of the present case, the assessee is a builder. Construction of buildings is its business. The assessee has sold number of buildings referred to above, with regard to which there is no dispute. The dispute is with regard to the sale of plots. Investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes to when the income from sale of land will be treated as agricultural income, exempt under the Act, not involved in the case in hands. In this appeal the Court is required to address the issue as to whether the sale transaction of land on the facts of the present case is capital receipt or revenue receipt. Therefore, the relied upon cases by the learned counsel for the department are distinguishable on facts and law as well. These decisions do not help the department any further. The Commissioner of Income-tax (Appeals) and the Tribunal on analysis of the facts of the case have reached to the conclusion that section 50C has no application as it was a case of transfer of plots which was stock in trade. An income earned from such transaction is liable to be taxed as income from business activity. Alternatively, the finding recorded by the Tribunal which is last fact finding court, in this regard is essentially a finding of fact or at the most is a mixed question of fact, but it is not a substantial question of law to warrant the interference under section 260A of the Income Tax Act. The view taken by the Tribunal is on terra-firma. The inference drawn by the Tribunal is ba ..... X X X X Extracts X X X X X X X X Extracts X X X X
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