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TMI Blog2012 (7) TMI 212X X X X Extracts X X X X X X X X Extracts X X X X ..... me shows that in treating the business income, the A.O. himself has accepted (a) index cost of acquisition and (b) exemption u/s.54EC. The A.O. cannot blow hot and cold in the same breath - in favour of assessee. - ITA No. 6214/Mum/2010 - - - Dated:- 30-5-2012 - Dinesh Kumar Agarwal And N. K. Billaiya, JJ. Appellant by : A. C. Tejpal Respondent by : Vijay Mehta ORDER Per N. K. Billaiya, A.M. With this appeal, the Revenue has challenged the correctness of the order of the Ld. CIT(A)-29, Mumbai dated 14.05.2010 for the A.Y. 2007- 08. 2. The grievance of the Revenue is that the Ld. CIT(A) has erred in directing the A.O. to treat the income of Rs..5,71,33,487/- as income from long term capital gain against the treatment of the same as business income . 3. The facts giving rise to these grievance show that for the year under consideration, the assessee filed return of income at Rs..5,87,13,380/- on 12.11.2007. The return was selected for scrutiny assessment. The detailed questionnaire along with the statutory notices u/s.143(2) and 142(1) were issued and served on the assessee. During the course of the assessment proceedings, the A.O. noted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be reduced from the facts and the circumstances of the case. The A.O. also relied upon the judgment of Hon'ble Bombay High Court in the case of A. P. Damodara Shenoyvs CIT reported in 26 ITR 650 wrongly mentioned as 261 ITR 650, in which the Hon'ble Court has held that What constitutes continuity is not necessarily the length of time during which the operations continue and on relying on other decisions, the A.O. finally concluded that the assessee s activity in relation to the so called Long Term Capital Gain is inherently and in essence a clear business activity or a activity taken to an adventure/enterprise of business. Hence the assessee s income from the so called Long Term Capital Gain is treated as income from business and profession . The assessment was completed at Rs..5,87,13,380/-. 4. The matter was taken before the Ld. CIT(A). The assessee reiterated its stand that the partnership so constituted on 17.04.1986 has undertaken only one project and even that project was completed in 1994. Thereafter, the assessee did not had any business, as the partners realised that, dealing in real estate is not their cup of tea and correctly decided to discontinue th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). (g) The cases cited by the Assessing Officer explain general principles relating to the issue of business Vs. investment and do not exactly cover the case of the appellant. For regarding an activity as business there has to be a course of continued dealings with a profit motive. There has to be volume, frequency, continuity and regularity of transactions as explained by several court decisions. These criteria are absent in the case of the appellant. In view of this the profit from the sale of property has to be assessed as long term capital gains and not as business income. The Assessing Officer is directed to assess the income from sale of property as long term capital gain and not as business income. This ground of appeal is allowed. 5. Aggrieved by this finding of the Ld. CIT(A), the Revenue is before us. 6. The learned DR strongly relied upon the assessment order pointing out towards two specific decisions considered by the A.O. i.e. 26 ITR 650 of Hon'ble Bombay High Court and 42 ITR 73 of Hon'ble Supreme Court. The DR argued that the assessee was into the business of developing and selling of properties since its inception and, therefore, it cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts of the case and has really not laid down any general propositions to be applied to all cases. Further, distinguishing the decision of the case relied upon by the learned DR in the case of A.P. Damodara Shenoy vs. CIT [26 ITR 650 (Bom)], the counsel pointed out that in this case, the Hon'ble Bombay High Court was concerned with the matter of continuity to determine the business connection of the agent for the purpose of S.43 of the Income-tax Act, 1922. In the light of this, it can be inferred that this decision does not have even remote applicability to the facts of the present case. 8. Replying to one more decision relied upon by the DR is of the Supreme Court in the case of Rajputana Textiles (Agencies) Ltd. vs. CIT (42 ITR 743), wherein the Hon'ble Supreme Court was again dealing with the issue of adventure in the nature of trade. According to the counsel this does not have any applicability with the facts of the present case, as the Hon'ble Supreme Court has decided the aforesaid case purely on the facts of its own wherein the transaction of purchase and sale of 13,00,000 shares by the managing agent of the managing agency company was held to be adventu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total income 5,87,13,379 Rounded off 5,87,13,380 Summarized working of long term capital gain Sale consideration for sale of property 7,35,00,000 Less: Solicitor s fees 1,00,000 Net sale consideration 7,34,00,000 Less: Indexed cost of acquisition and improvement 1,12,66,513 Net gain 6,21,33,487 Less: Exemption u/s. 54EC: Investment in Rural Electrification Corpn. Bonds 50,00,000 Taxable long-term capital gain 5,71,33,487 10. A perusal of the aforesaid statement of total income shows that in treating the business income, the A.O. himself has accepted (a) index cost ..... 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