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TMI Blog2015 (12) TMI 1797X X X X Extracts X X X X X X X X Extracts X X X X ..... development dated 29.07.1986 to purchase the land admeasuring 260680 sq. meters at Revenue Village Achole, Taluka Vasai for Rs. 1,42,00,000/-. It was seen from the agreement for sale that at the time of agreement, only 10% of the purchase price i.e. Rs. 14,20,000/- was paid and the remaining amount was to be paid in four equal half yearly installments. Thereafter, the deed of conveyance dated 20.10.1989 was executed in respect of the said entire property in favour of the assessee. The assessee got the building plans approved for Sector-1 on a portion of the said property admeasuring about 21,043 sq. mtrs. and commenced construction of 12 buildings on Sector -1. The remaining larger portion of the said property admeasuring about 2,10,686 sq.mts. was sold by the appellant vide Conveyance Deed dated 22.04.2008 for total consideration of Rs. 69,00,00,000/- and after deducting expenses related to transfer and the indexed cost of acquisition, the assessee had offered LTCG on sale of plot amounting to Rs. 62,34,88,496/- during the year under consideration. The Ld. AO. found that the sole purpose of constitution of the assessee firm was to purchase the said Entire Property and then use it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et from the year 2000 onwards also did not find favour . v) Buying and selling of freehold land or leasehold land was the main business of the appellant. 2.4.5 Per contra, Ld. AR for the appellant during the course of the appellate proceedings has filed detailed and comprehensive submissions and I must commend the quality of arguments made by Shri Pradip Kapasi, Ld. AR. 2.4.6 At the outset, it has been mentioned by the Ld. AR that all the details relevant to the computation of income were furnished by them before the Ld. AO. from time to time. Briefly, it may be important to go over the facts of the case once more to understand the issue under dispute. The appellant firm had entered into an agreement on 29.7.86 to purchase land at Taluka, Vasai for a consideration of Rs. 1,42,00,000/- and the conveyance of the land was done in the appellant's favour vide conveyance deed dated 20.10.1989. The appellant had debited the cost of purchase of the plots to the land account and not to the stock in trade account and had appropriated only that part of the land to the W.I.P account which was intended to be developed (sector A). It has been mentioned that a good part of the said land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arising was to be computed under the head 'Business Income' and consequently, benefit of indexation had to be disallowed. Certain other claims for expenses of Rs. 8.45 lakhs were also disallowed. 2.4.7 Ld. AR has made a point wise rebuttal of the observations of the Ld. AO and as regards the presumption that land was acquired for development, it has been stated that right from the year of purchase, the entire land was shown under the head 'Fixed Assets' till 31.3.2000 and it was never shown as stock in trade or WIP except a part of the land which was put for development (sector A). It has also been stated that the appellant was within its rights to determine the status of assets i.e. to determine whether it holds an asset as an investment or as stock in trade and retained the right to change the nature of assets depending upon its intention. It has also averred that the right of the appellant to treat an asset and hold it as an investment is undisputed and is approved by various courts including in the following cases:- i) Sir Kikabhai Premchand, 24 ITR 506 (SC) - In the said case, The assessee, a dealer in bullion and shares had withdrawn a part of the bullion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a matter into which the Court has to inquire. 2.4.9 As regards the Ld. A.O's observations that the appellant had started development of some part of the land in 1990, it has been stated that without prejudice to the fact that the appellant had never treated the disputed part of the land in sectors B to G as stock in trade and had never shown the same in the books as such, but has shown the same has fixed Assets, Ld. AO. misdirected himself in not considering the fact that the said part of the land was not developable for several reasons. It was thus, contended that Ld. AO's observations that the appellant had acquired the said land for development and held it as such was totally unwarranted especially in view. of the fact that the appellant had clarified its intention to hold the said part of land as an investment w.e.f. 1.4.2000. 2.4.10 The contentions raised by the appellant have been considered and it is found that w.e.f. 1.4.2000, the appellant had consistently shown the impugned land as an investment, a fact which has not been negated by the Ld. AO and merely because on some part of the total land' (sector A), some development had been undertaken, the fact of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to develop the said land as a business venture nor was any activity ever carried out in the said piece of land, a fact which was confirmed by the third party i.e. purchasers of the land from the appellant as well as verification carried out by the Income tax Inspector during the course of assessment proceedings for A.Y.2008-09. 2.4.12 It has also been stated that without prejudice to the stand taken. by the appellant, even if it was assumed that the appellant was in the business of purchase and sale of land, it could not be held that every piece of land which it purchased had to be necessarily sold as a business venture and it was permissible under the law, as held by various courts, for even a builder to hold a land as an investment and any gain arising on the sale of such land held as investment has to be brought to tax as capital gains. Reliance was also placed on the decision of Hon'ble Supreme Court in the case of Bengal & Assam Investors Ltd., 59 ITR 547 (SC) and Dalhousie Investment Trust Co. Ltd. 66 ITR 473 (SC) in respect of the fact that an assessee has a right to treat any part of its assets as an investment even after it was carrying business activity in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t call for any interference in so far as treatment of land as investment is concerned. Therefore, the action of the Ld. AO in interfering with the entries made w.e.f. 1.4.2000 was completely uncalled for without bringing anything to the contrary on record to suggest that the appellant was a dealer in land. The said piece of land has been held for over 20 years without any development potential or even laying of an inch of brick on the same and therefore, in all fairness, claim made by the appellant regarding LTCGs cannot be faulted. Accordingly, Ground No.2 has to be allowed in so far as treatment of the nature of income is. concerned. 5. Against the above order of CIT(A), revenue is in appeal before us. 6. It was vehemently argued buy ld. AR that after purchase of land in the year 1986, major part of the same was held as investment and not as stock-in-trade. The assessee firm has also passed accounting entries on 1-4-2000 to show in its books of accounts that the firm held the said part of land as investment and ever since the said asset was being shown as investment. He also invited our attention to the scrutiny assessment framed u/s.143(3) to show that in the assessment year 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no construction activity was carried out thereon. The CIT(A) has dealt with the each and every objection of the AO and recorded a finding to the effect that assessee had consistently held and shown the land as investment w.e.f.1-4-2000. The CIT(A) also found that assessee was consistently maintain its books f account wherein land was shown as investment, cannot be brushed aside without any contrary material brought on record by the AO to suggest that in the entry made by assessee, it had some intention to develop the said piece of land. As per Section 45(2), the assessee has got an option to convert his capital assets into stock in trade. Once a piece of asset is held by an assessee as investment in the books of accounts, the gain arising on the transfer of said asset shall have to be treated as capital gains. We found that the CIT(A) has correctly appreciated the facts of the case and after applying judicial pronouncements as laid down by the Hon'ble Supreme Court and Hon'ble High Court as discussed in his order, came to the conclusion that treatment in the books of accounts from 1.4.2000 completely removed any doubts whatsoever regarding the nature of the said asset as investmen ..... 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