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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 ..... ale of the said property as "Long Term Capital Gain". The A.O. sought an explanation from the assessee why the capital gain declared should not be treated as business income specifically pointing to the object clause of the partnership deed dated 17.04.1986. According to which, the main object of the partnership include objects such as carrying on business as dealer, contractor, proprietor and the dealer in land, building, shops, office premises and godown etc. According to the A.O., the activity of selling the building during the year under consideration is nothing but a business activity and accordingly any profit derived should be treated as "profit from business" and not "Long Term Capital Gains". 3.1 In response to the show cause notice, the assessee replied that the partnership firm has two partners who are husband and wife. The firm purchased a property at Khetwadi on 15.11.1997 which consist of tenements occupied by 72 tenants for a consideration of Rs..60,00,000/-. The main intention of the assessee to purchase this property was investment and also to get rental income as the partners were getting older and older. It was also pointed out by the assessee that the partners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estment to fetch rental income or other income regularly. 4.1 After considering the facts and the arguments and the submissions made by the assessee, the Ld. CIT(A) held that the income offered by the appellant has to be treated as "income from capital gains". The findings of the Ld. CIT(A) were based on the following facts :- "(a) Although the appellant firm had in its objective clause, the objects of developing properties, there is no evidence of any business activity carried on for the last nine years. In fact there are neither any employees nor any regular office of the appellant firm. The only activity that has been done by the appellant firm are in relation to the property are that three applications have been m1ade to various Government Departments, such as BMC, MHADA for NOC. There is no bar for a firm carrying out business activities to hold property as investment. Frequency of transaction is a basic rule in order to arrive at a conclusion that whether a certain activity is business activity or not. In this case there has been no activity for a period of 9 years. (b) The firm did not maintain any regular books of accounts. It did not disclose any business income. At t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly concluded that this is nothing but an adventure in the nature of trade and the A.O. has rightly treated the income under the head "profits and gains from business and profession". 7. The learned counsel appearing for the assessee strongly objected to the submissions of the learned DR. He pointed out that the assessee has purchased the said property on 15.11.1997 which was occupied by 72 tenants and since then the assessee has been receiving the rental income from the tenants. The learned counsel drew our attention to the paper book filed in this case by the assessee and specifically pointed out that from the A.Y. 2001-02 till the A.Y. 2006-07, the assessments have been completed u/s.143(3) of the Act and in all these years, the rental income derived from the said property has been accepted as income from house property by the department after thoroughly scrutinising the return and the computation of income for the relevant assessment year. The counsel further argued that the business activities were already closed in 1994 and the tenanted property was purchased in 1997 to earn income without any intention to carry on the business and for all these years, the assessee has neith ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard the rival submissions perused the orders of the lower authorities and the submissions made during the course of the assessment proceedings and the paper book filed. The whole exercise by the A.O. revolves around the solitary fact that in the partnership deed dated 17.04.1986, the purpose of the firm was to carry on the business as builder, contractor and dealers in land buildings, shops, office premises, godowns, warehouses and industrial estates. We find that during the course of the assessment proceedings itself, the assessee has pointed out that the said business was discontinued after 1994. During the said period of the business activity, the assessee had undertaken only one project. Thereafter, the assessee has not done any activity except for purchasing the property at Khetwadi with 72 tenants in November, 1997. Even on this property, the assessee has done nothing for 9 years. Income from the said property was shown as "income from house property" which has been accepted by the department in the scrutiny assessment starting from the A.Y. 2001-02 till 2006-07. 9.1 We also find that for the year under consideration on the one hand, the A.O. has treated the gains as "income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 1(1) (Bang) (2010) 127 ITD 94. In this case, the ITAT Bangalore held that "A firm involved in real estate business can hold land as investment and/or as stock in trade. This decision has to be taken only by the firm and its management and not by the Assessing Officer. The AO was not right to deem the asset of the firm to be stock in trade according to his whims and fancies. The firm would have various business plans and propositions by which it would have thought proper to hold the land as investments." 11. After considering the facts in totality and the case discussed hereinabove, we hold that the conduct of the A.O. by accepting the computed figure of long term capital gain as evidenced from the statement of the total income cited hereinabove show the lack of application of mind on the part of the A.O. The findings given by the Ld. CIT(A) are on the facts of the case. We do not find any infirmity or error in the findings of the Ld. CIT(A). Accordingly we hold that the income is to be taxed as "long term capital gains" as declared by the assessee. Accordingly the appeal is dismissed. 12. In the result, the appeal filed by the Revenue is dismissed. Order pronounced on this 30t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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