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TMI Blog2012 (10) TMI 781X X X X Extracts X X X X X X X X Extracts X X X X ..... e produced before the Assessing Officer. In view of the above discussion, no merit in the appeal of the revenue - in favour of assessee. Compensation for delay in handing over the possession of the property - holding charges - Income from property v/s Capital receipt - t in case the developer failed to construct the building then it will pay a compensation of Rs. 50 per sq.ft. of the super area per month to the intending allottee for the period of such delay - initially assessee shown receipt of holding charges as rental income - Held that:- Compensation received form DLF Commercial is a capital receipt - in favour of assessee. - ITA No. 3382/Del/2011 & ITA No. 2892/Del/2011 - - - Dated:- 12-10-2012 - SHRI G.D. AGRAWAL, AND SHRI RAJPAL YADAV, JJ. Revenue by: Ms. Reena S. Puri, CIT Dr. BRR Kumar, Sr. DR Assessee by: Shri Ajay Wadhwa, Adv. Rajeev Sabharwal, CA ORDER PER RAJPAL YADAV: JUDICIAL MEMBER The revenue and assessee are in cross-appeals against the order of Learned CIT(Appeals) dated 05.04.2011 passed for assessment year 2008- 09. First, we take the appeal of the revenue. The grounds of appeal raised by the revenue read as under: On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Valley Business Park P Ltd. Total 10.02,26,250 4. Assessing Officer collected information from the Internet and formed an opinion that one of the purchaser is Metro Valaley Business Park Pvt. Ltd. who is developing a special economic zone on a large piece of land in this area. The land purchased from the assessee forms only a small part of the land which is being used for the purpose of developing SEZ. Thus, he formed an opinion that the land sold by the assessee ceases to be an agricultural land. The assessee ought to have offered capital gain on the sale of this land. He, therefore, invited the explanation of the assessee as to why the transactions relating to the above land had not been reported in column of the ITR Form. He directed the assessee to furnish the details of agriculture operation carried on by her and how the land is to be treated as agricultural land. In response to the query of the Assessing Officer, it was contended that sec. 2(14) of the Act provides the definition of expression capital assets . According to this definition, capital assets means property of any kind held by an assessee whether or not connecte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erved that assessee had carried out the activity of sale and purchase of land systematically and, therefore, it is an adventure in trade. The income from sale of land is to be assessed as a business income. Accordingly, he treated alleged gain of Rs.965,53,491 as a business income. Assessing Officer in this way, determined the taxable income of the assessee at Rs.10,29,98,180. 7. Dissatisfied with the assessment order, assessee carried the matter in appeal before the Learned CIT(Appeals). Along with her appeal, she filed statement of facts running into 30 pages. In the statement of facts, she has demonstrated in seriatim as to how agricultural land owned and possessed by her prior to its sale was an agricultural land. It did not cease to be an agricultural land. The facts narrated by the assessee on page Nos. 7 to 12 of the statement of facts are worth to note in order to understand. What documentary evidence assessee brought to the notice of the learned Assessing Officer in support of her explanation. It reads as under: (i) that all the Sale Deeds of the "Agriculture Lands" purchased by the Appellant in the year 1995-96, and in the year 2003-04, show that the lands were "Agri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the "Agriculture Land" in Village 8alola, Tehsil Sohna, Gurgaon, which was purchased by the Appellant in the year 2003-2004, has been regularly assessed by the Department in the "Returns 01 Wealth", of the Appellant as "Agriculture Land" under the heading "Immovable Asset" (which is Non Taxable Asset being exempt under section 2(e) (a) of the Wealth Tax Act), continuously for the last 4 years i.e. during the Assessment Years 2004 -2005,2005-2006,2006-2007 and 2007-2008. (xiii) that during the Assessment Year 2005-06, the "Return of Income", of the Appellant was selected for scrutiny, an Assessment Order dated 27.10.2005, under section 143(3) of the Income Tax Act was passed by the Department and during the said Assessment year 2005-2006, the said "Agricultural Lands" had been assessed by the Department in "Return of Wealth", of the Appellant as "Agricultural Lands" under the heading "Immovable Assets" (which is Non Taxable being exempt under section 2 (e) (a) of the Wealth Tax Act. (xiv) that during the Assessment Year 2005-06, the "Return of Wealth" of the Appellant was selected. for scrutiny, an Assessment Order dated 16.3.2006, under section 16(3) of the Wealth Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellate Order dated 8.3.2006 passed under section 250(6) of the Income Tax Act. That it was also proved to the Ld. Addl. CIT that the said Appellate Order of CIT (Appeals) was not challenged by the Department, and hence the Assessment of the said "Agriculture Lands" under the heading "Immovable Asset" (which is non taxable and exempt under section 2(e)(a) of the Wealth Tax Act) has become final and binding on the Department. (xvi) that in the "Detailed Note" dated 2~. 11 .~01 0 on the Sale of "Agriculture Lands" in village 8alola and Village Gwal Pahari", submitted by the Appellant to Ld. Add!. CIT, it was proved that the "Agriculture Lands" sold by the Appellant are situated at a distance of 12 KM and 15 KM outside the Municipality limits of Gurgaon and the said "Agriculture Land" do not fall within the definition of "Capital Asset" provided under section 2(14)(iii)(b) of the Income Tax Act, and hence no Capital Gain is applicable on the said "Agriculture Lands". (xvii that in the "Note" dated 13.12.2010 on supporting documents of "Agriculture Lands" in village Balola Village Gwal Pahadi, Tehsil Sohna, Distt. Gurgaon, which were sold by the Appellant in the year 2007-2008" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that land in dispute is an agricultural land. It was situated within the revenue estate of Village Pahari Gwal and Balola in Gurgaon District. Both these revenue estates are situated at a distance of 12 KMs to 15 KMs outside the municipal limit of Gurgaon. Learned CIT(Appeals) took into consideration land revenue record maintained under the Punjab Land Revenue Act i.e. Jamabandi Khasra Girdawari and mutation register. The report obtained from the Patwari i.e. ( a revenue official under the Punjab Land Revenue Act who maintains the revenue record ). Learned CIT(Appeals) also observed that Assessing Officer has appreciated the facts wrongly. According to the Learned CIT(Appeals), the land of the assessee was never formed part of SEZ, before its sale or subsequent to the sales also. It is an incorrect inference of facts at the end of learned Assessing Officer to say that this land was forming part of SEZ. Learned first appellate authority in this way held that land of the assessee was an agricultural land which was sold by her and which does not liable her to pay capital gain tax. 9. This part of the learned first appellate authority s order has not been challenged by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on the date of acquisition, the said agriculture land was an agriculture land, and on the date of sale, the said agriculture land was an agriculture land. It is clarified that even today the said agriculture land is an agriculture land. Since the assessee was growing older and in order to secure her future for a stable and regular income, the assessee had from the proceeds received from the sale of the said agriculture land, purchased office spaces, and the said office spaces are giving regular and stable rental income to the assessee which is being assessed to tax as income from house property. (iv) The above purchase of the agriculture land in the year 1995-96 and in the year 2003-04 and sales thereof as it is without making any changes therein during the year 2007-08 in full, does not, in any manner whatsoever, tantamount to any business activity. Sir, we have already provided to you the Wealth Tax Returns of the assessee for the year 2003-04, 2004- 05, 2005-06, 2006-07 and 2007-08. Sir, from the said wealth tax returns of the assessee, you will kindly appreciate that there is no other sale of any agricultural lands or any other properties by the assessee up till the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness. 13. Before us, Learned DR relied upon the order of the Assessing Officer. She pointed out that assessee is a reader in a college. But from the last many years, she has been showing huge property income. She has been purchasing plots, flats and agricultural land on regular intervals. She has sold some of the properties during the year. She has sold earlier also. The details have been mentioned by the Assessing Officer in Annexure-A. Learned CIT(DR) took us through Annexure-A and appraised us the systematic manner of acquisition of property by the assessee. The learned counsel for the assessee on the other hand relied upon the order of the Assessing Officer. He placed on record brief written synopsis and also relied upon the following case laws: i) CIT vs. R.V. Gupta (Del) ITA No. 175 of 2002 (2002) 258 ITR 261; ii) Janki Ram Bahdur Ram vs. CIT (S.C) (1975) 57 ITR 21; iii) CIT vs. Kasturi Estates (P) Ltd. [1966] 62 ITR 578; iv) CIT vs. A. Mohammed Mohideen (1989) 176 ITR 393. 14. We have heard the rival contentions and gone through the record carefully. Section 2(13) of the Income-tax Act, 1961 provides the definition of expression business . According to this defi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nture in the nature of trade. In order to harbor a belief that assessee is engaged in the trading of real estates. Learned Assessing Officer has observed that assessee has purchased the land with a view to sell it at a profit. He made reference to Annexure-A attached with the assessment order and observed that in assessment year 2004-05, assessee has acquired four properties at DLF City-I, Gurgaon. This is the first instance referred by the Assessing Officer to say that assessee is venturing in the trade of real estates. Before Learned CIT(Appeals), it was contended that this observation of the Assessing Officer is factually incorrect. The property B-4, Qutab Plaza, DLF City-I, Gurgaon was acquired by the assessee in September, 1995. It has not been sold. Learned Assessing Officer has erroneously referred this property to be acquired in assessment year 2004-05. Similar is the position with regard to property bearing No. BB-4, Qutab Plaza, DLF, Gurgaon. The third instance cited by the Assessing Officer is in respect of property bearing No. JB-18, Qutab Plot, DLF City-I, Gurgaon. According to the Assessing Officer, this property was acquired by the assessee in assessment year 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her wealth-tax return. The investment was not made out of borrowed funds. The most of the properties retained by the assessee for a period of more than ten years. Learned Assessing Officer in his chart made reference to fifteen properties where assessee has made investment. All these properties are retained by the assessee except two. The one apartment was gifted to her daughter and the other was sold for compelling circumstances. Otherwise, she has been earning handsome house property income and offering such income for taxation. 19. The properties are duly shown in the returns more particularly in the wealth-tax return. Thus, in our opinion, learned Assessing Officer draw wrong inference by considering the facts in an erroneous manner. He could not bring any material which suggests the dominant intention of the assessee to earn profit by selling the properties at higher rate immediately after the purchase. On the other hand, assessee has demonstrated that she has been making investment in the properties intending to hold them, enjoy their income. 20. The revenue in its grounds of appeal has also pleaded that Learned CIT(Appeals) has deleted the addition by entertaining additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. 25. The learned counsel for the assessee submitted that right from the beginning, assessee was saying that she has received a sum of Rs.1,28,600 per month as a compensation from M/s.DLF Commercial Developer on account of delay in construction of the property purchased by the assessee. The assessee has pointed out that in assessment years 2005-06 and 2006-07 inadvertently she has shown this compensation as rental income. In the present year, assessee has realized her mistake of showing such income as rental income because she has not received the possession of the property. In such situation it cannot be an income from house property. It is a compensation which is a capital receipt and the assessee has rightly reduced the cost of acquisition by such compensation. The taxability of this receipt would be dealt with when the property will be sold by the assessee. The capital gain would be on higher side because part of the cost of acquisition is being already set off against this compensation. In support of his contentions, he relied upon the following decisions: i) DDA vs. ITO (1995) reported in 53 ITD 19; ii) Kushal K Bangia Vs. ITO reported in ITA No. 2349/Mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this case are almost similar to the facts of the assessee. The DDA has floated a scheme for construction of flats which was to be financed by the prospective allottee. The DDA could not complete the construction within the stipulated period provided in the allotment letter. It has credited the interest on the amounts paid by the allottees to the DDA for the construction of the flats. The ITO disallowed the payment made by the DDA on the grounds that it has failed to deduct the TDS. The dispute traveled up to the ITAT on the issue whether the payment made by the DDA is an interest within the meaning of sec. 2(28)(A) of the Income-tax Act, 1961 or not. The ITAT held that though the nomenclature is interest but it is not the interest as such, it is a compensation paid by the DDA on account of delay in the construction of the developed units and the term interest used only as a measuring of quantification. ITAT held such payment by DDA as capital receipt in the hands of allottee. Similar is the situation in the present case. Taking into consideration all the facts and circumstances, we allow the ground of appeal raised by the assessee and direct the Assessing Officer to treat this ..... X X X X Extracts X X X X X X X X Extracts X X X X
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