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TMI Blog2015 (12) TMI 1292X X X X Extracts X X X X X X X X Extracts X X X X ..... Shanti Banerjee (deceased) by LRs (2015 (11) TMI 1213 - DELHI HIGH COURT ) where the construction and sale of the flats do not change the character of the asset and there was no material to show that the Assessee ever had the intention to exploit the plot as a commercial venture, the transaction cannot be characterized as ‘an adventure in the nature of trade’ leading to the resultant receipt as business income in her hand. The fact that the Assessee got a flat on the rear second floor apart from the original constructed portion on the ground floor made no difference to the nature of the transaction. The AO, the CIT (A) and the ITAT have proceeded on an erroneous legal premise that the agreement entered into by the Assessee with the builder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad been continued to be under her occupation for more than 30 years. The aggregate cost of construction was about ₹ 86,285. 4. On 2nd March 1988 the Assessee entered into an agreement with M/s. Mac Consolidation ('the builder') for construction of additional area on the property in question. However, this agreement did not materialize on account of financial strains, old age and ill health. Thereafter, on 1st April 1989 a fresh agreement was entered into by the Assessee with the builder, a copy of which has been placed on record, stating that the Assessee had approached the builder for their assistance in the construction of the said residential building on the terms and conditions set out in the earlier agreement dated 2nd March 198 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... possession. 7. The net result of the above agreement was that the entire pre-determined cost of construction was to be incurred by the builder and the Assessee was to be provided with a flat on the rear of the second floor at a pre-determined cost of ₹ 5,32,855. The Assessee was also entitled to the share of the profit on the sale of the flats. 8. The Assessee filed her return of income for the AY in question on 11th October 1990 declaring a profit of ₹ 4 lakhs under the head 'long term gain' and claimed deduction of ₹ 3,75,000 under Section 54B of the Act. The Assessee also declared net taxable income of ₹ 7,500 under the head 'capital gains'. 9. The said return of the Assessee was accepted by the Revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... different parties. The additional fact that requires to be noticed is that construction, profit and loss account (P&L) of the builder for the year ended 31st March, 1980 was placed on record before the AO. In the 'Construction Account' in the credit column, the builder disclosed the entire consideration received "by sale value of flats received on behalf of land owners' as ₹ 35,10,000/-. It is not in dispute that the Assessee received ₹ 4 lakhs towards share of the profit on the sale of the flats. 12. The AO passed an assessment order under Section 147/143(3) on 5th March, 1999 in which the amount received by the Assessee was treated as business income. The AO computed the profit from the sale of the flats as ₹ 4,00,000 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lats as also a flat on the second floor, the value of which was ₹ 5,32,855. The original property, i.e, ground floor and the mumty has remained untouched since the agreement between the Assessee and the contractor stipulated the construction of addition area of an approximately 990 sq.ft. out of which only a flat whose value was ₹ 5,32,855 came to the Assessee.....The net result of the whole exercise is that the original property remains intact and the entire new construction gets sold off and the assessee gets a flat in the additional space constructed. In our opinion, it is not possible to treat the sum of ₹ 4,00,000 as falling under one head and the sum of ₹ 5,00,000 and odd as falling under a different head as ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the additional portion of land apart from the originally constructed portion, it is pointed out that the entire facts were placed by the Assessee before the AO. 17. The Court finds that merely because the Assessee approached the builder for constructing the flats on the portion apart from the already constructed portion, would not make the transaction an 'adventure in the nature of trade.' All that the Assessee had received from the sale of the flats was a residential flat of the value of ₹ 5,32,855 and ₹ 4 lakhs in cash as a result of the agreement entered into with the builder. As explained by this Court in Shanti Banerjee (deceased) by LRs (supra), after considering the decision in G. Venkataswami Naidu & Co. v. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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