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TMI Blog2017 (4) TMI 409X X X X Extracts X X X X X X X X Extracts X X X X ..... 39(1) of the Income-tax Act ?" 3. Independent of the first question, the second question as has been formulated by the Revenue is as under : "Whether in the facts and circumstances of the case, the Tribunal was right in law in allowing the assessee's appeal as regards loans advanced to the sister concerns by holding that the said loans were given for commercial expediency even when no document or any evidence relating to any such agreement was found during the course of search and the assessee also failed to substantiate such claim ?" 4. On the latter question, we may record that learned counsel appearing for the Revenue has fairly conceded that the aforesaid question is already covered by the decision of this court dated October 14, 2014 in I. T. A. No. 175 of 2014 against the Revenue. Hence, we find that the said question would no more hold for consideration in the present appeals, since it is already covered by the decision of this court against the Revenue and in favour of the assessee. 5. The aforesaid would lead us to examine only the first question, which is common in all the appeals. 6. The short facts of the case appears to be that the assessee filed returns for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transactions of the assessee constitute 'adventure in the nature of trade' and was in the course of profit making scheme. 11.1 However, the divergent views of the assessee were that it had acquired a vast land ad-measuring to the extent of 52 acres in C. V. Raman Nagar from Raja Bagmane way back in 1996. During the year 2000, the assessee intended to set up STPI for which it had approached the Union Government for its approval in July, 2002 and subsequently, STPI came into being on the subject property. According to the assessee, after having set up the STPI and the assessee had no intention to go for further exploitation spree in the said piece of land, the same was sold to three parties with a specific condition to set up STPI/IT parks and the details of which are as below : Assessment Name of the purchasers Area Surplus 2002-03 Embassy Constructions 291360 5,83,10,000 2004-05 (24.9.03) Texas Instruments 304920 35,98,05,600 2005-06 (9.12.04) Cognizant Technology Solutions 130680 29,17,69,920 11.2 Further contention of the assessee was that it had erroneously offered the surplus arising on the sale of the above piece of land as "business income" in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a non-agricultural zone. Had the assessee attempted to put to use the subject land for cultivation purposes as attributed by the Assessing Officer, it would have contravened the conversion pro vision which, in our view, the Assessing Officer would not have been unaware of it ? It could also be seen from the sequence of events that the assessee did construct Tech Park on the subject property after obtaining due approval from various Government agencies-the State and Central. Sale of a piece of land from the vast holding of total area of 52A was merely a coincident which cannot, by any stretch of imagination, be constructed or categorized as a regular feature (business) of the assessee. It was an un-denying fact that the assessee did purchase the HMT property that too at the fag end of March 2007 which, according to the assertion of the assessee, held by it for barely six months before selling it away. This cannot be categorized as a precedent or taking a leaf out of it to jump into a hasty conclusion that the assessee had indulged in buying and selling of lands as its business. 11.6 Let us now turn our attention towards the case law on which the rival parties have placed their fai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ltd. v. CIT reported in [1994] 208 ITR 232 (Bom), the hon'ble court, after analysing the issue -whether the purchase and sale of the Fort property by the assessee was a purchase and sale of a capital asset or it was a business trans action or an adventure in the nature of trade-ruled that (page 244) : 'We have considered the rival submissions of counsel for the parties. The first question that falls for determination is whether the purchase and sale of the Fort property by the assessee was a purchase and sale of a capital asset or it was a business transaction or an adventure in the nature of trade. To decide this question, it is necessary to note a few factual findings of the Tribunal. Before the Tribunal, it was contended by the assessee that it had acquired the above property from its holding company as "stock-in-trade". Reliance was sought to be placed on the fact that in the books of account of the assessee, it was shown as "stock-in-trade". This contention of the assessee was repelled by the Tribunal. It was held : "Our conclusion, therefore, is that the subsidiary company (assessee) acquired the property as a capital asset and sold it as such. No acceptable evi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In other words, it was retained by the assessee as a capital asset.' 11.7 With regard to the Assessing Officer's observation that the assessee in its original returns of income for the assessment years under dispute, profits from sale of the piece of land were offered for taxation under the head 'business income', it was confronted by the assessee that mere erroneous offering of surplus as business income or the mere categorization as inventories in the balance-sheet cannot go to show that the intention of the assessee was to resell the land. 11.8 In this connection, we recall the ruling of the Hon'ble highest judiciary of the land in the case of Kedarnath Jute Manufacturing Co. Ltd. v. CIT (Central) [1971] 82 ITR 363 (SC), wherein, the hon'ble court was pleased to observe that (page 367 of 82 ITR) : 'We are wholly unable to appreciate the suggestion that if an assessee under some misapprehension or mistake fails to make an entry in the books of account and although, under the law, a deduction must be allowed by the Income-tax Officer, the assessee will lose the right of claiming or will be debarred from being allowed that deduction. Whether th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ke of the assessee in recording the financial statements cannot be seriously viewed in interpreting the provisions of the Income-tax Act. The subsequent conduct of the assessee in leasing out the buildings also reflects the initial intention of the company to hold these assets as fixed assets/investments. 11.9.2 In an overall consideration of facts and circumstances of the issue as deliberated upon in the foregoing paras and also in conformity with the legal position cited supra, we are of the considered view that the authorities below were not justified in holding that the surplus rising on sale of a piece of land as 'business income' for the assessment years 2002-03, 2004-05 and 2005-06. It is ordered accordingly." Under these circumstances, the present appeals before this court. 7. It may be recorded that the Revenue has preferred the appeals being I. T. A. No. 145 of 2011, I. T. A. No. 146 of 2011 and I. T. A. No. 157 of 2011 for the respective assessment years, whereas the assessee has preferred appeals being I. T. A. No. 183 of 2014, I. T. A. No. 349 of 2014 and I. T. A. No. 350 of 2014. 8. We have heard learned counsel Mr. K. V. Aravind appearing for the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appreciation of the evidence, has recorded a finding of fact that the land can be termed as "capital asset" and has found that there was error committed on the part of the assessing authority in treating the income as "business income", this court may not interfere with the order passed by the Tribunal since the Tribunal is the ultimate fact finding authority. He submitted that in the various decisions of the High Courts as well as of the apex court, the parameters for treating the income as "capital gains" or "business income" are provided. The Tribunal has undertaken such exercise and thereafter was satisfied on the point that it was "capital gains" and not "business income". He, therefore, submitted that this court may not interfere with the order passed by the Tribunal. 11. However, in the appeals preferred by the assessee, learned counsel declared that if this court is not to enter into the finding of fact, possibly the appeals of the assessee would no more survive and the other question would no more arise for consideration in the present appeals. 12. We may, at the outset, record that the scope of judicial scrutiny in the appeal against the order of the Tribunal is lim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a particular case. One of the principal tests is whether the transaction is related to the business normally carried on by an assessee. The nature of the commodity would also be a relevant factor. It is equally well settled that, merely because the original purchase was made with the intention to resell, if an enhanced price could be obtained, that by itself is not enough to infer that an assessee is carrying on business. However, though profit motive in entering into a transaction is not decisive, if the facts and circumstances indicate that the purchase of the asset was made solely and exclusively with an intention to resell the asset at a profit, it would be a strong factor for inferring that the transaction was in the nature of business. In the case of Pari Mangaldas Girdhardas v. CIT [1977] CTR (Guj) 647, after analysing various decisions of the apex court, this court has formulated certain tests to determine as to whether an assessee can be said to be carrying on business. (a) The first test is whether the initial acquisition of the subject- matter of transaction was with the intention of dealing in the item, or with a view to finding an investment. If the transaction, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f approval to set up a software park during the year 2000 ; (iv) Software park projects are consisting of buildings for office purposes is set up in a specific location with prior approval of the State and Central Government installed with various infrastructures required for developing and transmitting the software ; (v) The promoters of a software park can generally view this project only for the purpose of investment and not as stock-in-trade ; (vi) The buildings and infrastructures created are leased out to various clients, the maintenance of which is looked after by the promoters. 15. On the basis of the aforesaid facts and circumstances, based on the factual scenario the Tribunal has recorded the finding of fact that the assessee- company has erred in disclosing the land earmarked for promoting software park in the financial system of stock-in-trade. The Tribunal has further found that it is genuine mistake of the assessee in recording the financial statements cannot be seriously viewed in interpreting the provisions of the Income-tax Act. The Tribunal has also further recorded that subsequent conduct of the assessee in leasing out the buildings also reflects the initi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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