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TMI Blog2022 (4) TMI 447X X X X Extracts X X X X X X X X Extracts X X X X ..... , in so far as it is prejudicial to the interest of revenue, is opposed to law and the facts and circumstances of the case. 2. On the facts and in the circumstances of the case and in law, is the Ld. CIT(A) justified in deleting the disallowance of the deduction claimed under section 54F of the Income Tax Act, 1961 for an amount of Rs. 4,48,10,155/- on the ground that nature of transaction in the instant case attracts capital gains and not business income. 3. On the facts and in the circumstances of the case and in law, is the Ld. CIT(A) justified in holding that the assessee did not exploit the asset for commercial benefit ignoring the fact that the Joint Development Agreement was entered with the "sole Intention" of profit maximisation. 4. On the facts and in the circumstances of the case and in law, is the Ld. CIT(A) justified in deleting the disallowance of the deduction claimed under section 54F of the Income Tax Act, 1961 by holding that the assessee did not venture into activities which were similar to adventure in nature of trade. 5. On the facts and in the circumstances of the case and in law, is the Ld. CIT(A) justified in directing the AO to allow the deduction u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39 5. As already stated, the assessee and Ms. Swarupa Bejawada jointly purchased the property located at Harlur Village, varthur hobli and their share in the property and cost of acquisition was as follows: Particulars Owner Total Bhaskar Reddy Swaroopa B Share in Property at the time of Purchase 70% 30% 100% Area 30,492 13,068 43,560 Cost (A) 3,081,372 1,320,588 4,401,960 Super Built-up Area Received(B) 39,208 16,781 Cost Per Square Feet(A/B) 78.59 78.70 Purchase Consideration Total Sold area (sq,ft)(D) 18,009 Cost per square feet(E) 78.70 Cost of Acquisition Rs(D)*(E) 14,15,334 Indexed cost - 2004-05 - Year of Purchase 480 Indexed cost - 2014-15 - Year of Sale 1,024 Indexed cost of Acquisition(Rs.) 30,19,380 The cost of acquisition was claimed by the assessee as Rs. 30,19,380/- in the manner given above. 6. The assessee had invested in a property, situated at HAL II Stage Extension, Bangalore vide dated 28/02/2015 for a consideration of Rs. 5,33,33,334/- and the same was claimed as deduction (Eligible amount) under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n appeal before the Tribunal. 9. We have heard the rival submissions. The issue to be adjudicated is as to whether the sale proceeds of the built-up area which the assessee was to receive from the Developer as his share of built-up area under the JDA is to be assessed as Capital Gain or Business Income. In this regard the learned DR submitted that the deduction u/s.54F of the Act ought not to have been allowed to the assessee because the holding period of the built-up area that the assessee received under the JDA was less than 36 months and the capital gain was short term capital gain for which the benefit of deduction u/s.54F of the Act is not available. This argument of the learned DR is reflected is ground No.5 raised by the revenue though such a ground was never invoked by the AO or was discussed by the CIT(A). 10. On the issue whether the sale proceeds received by the Assessee on sale of flats that he obtained under the JDA gives raise to income from business or income from capital gain, we have to necessarily look into the definition of business as given in the Act. Section 2(13) of the Act defines 'business' and it reads as under : - 'Business' includes any trade ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de. 12. The above tests laid down by the Hon'ble Supreme Court still holds good in deciding cases where the question arises for consideration as to whether a single or isolated transaction can be regarded as an Adventure in the nature of trade so as to characterize the income as business income. 13. The Supreme Court has also laid down that cases of commercial commodities stand on different footing from land. A transaction of purchase of land cannot be assumed without more to be a venture in the nature of trade Janki Ram Bahadur Ram Vs. CIT (1965) 57 ITR 21 (SC) and P.M.Mohammed Meerakhan Vs. (1969) 73 ITR 735 (SC). It was also held that land is not generally or ordinarily a trading commodity unlike, for example, manufactured articles that are normally the subject-matter of trade. Land, on the other hand, is often the subject-matter of investment CIT Vs. Kasturi Estates (P) Ltd. (1966) 62 ITR 578 (Mad). If a land-owner developed his land, expended money on it, laid roads, converted land into house sites and with a view to get a better price for land, eventually sold plot for a consideration yielding a surplus, it could hardly be said that transaction was anything more than a real ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the time of purchase is very material. The assessee had no intention of doing any business and earn income at the time when he bargained to purchase the property in question and therefore the gain in question has to be regarded only as income chargeable to tax under the head "Capital Gain". The assessee is not in the business of dealing in real estate. The assessee's claim that there are no instances of similar transaction in the past is not disputed or contradicted by any material brought on record. As submitted by the learned counsel for the assessee, intention at the time of acquisition of the property will be a guiding factor. There is no material brought on record to show what the intention of the assessee was at the time when he acquired the property. The assessee claims that his intention was to hold the property as investments and to earn rental income. The Revenue says the circumstances show that the intention was to indulge in an adventure in the nature of trade. One of the tests laid down by the Hon'ble Supreme Court in the case of G. Venkataswami Naidu (supra) is to see whether the assessee as a purchaser was a trader and were the purchase of the commodity an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined the claim of the assessee under the head "Capital Gain" in accordance with the provisions relating to capital gain as given in the Act. We therefore remand the question of computation of Capital Gain to the AO after due opportunity of being heard afforded to the assessee. The AO will examine the claim of the assessee that it did not sell its share of built-up area under the JDA but sold only it's right to receive built up area from the Developer and therefore the entire gain has to be considered as long-term capital gain as the rights under the JDA was owned by the assessee for more than 36 months. If on the contrary the AO comes to the conclusion that what was sold was the built up area under the JDA, then, the AO has to carry out the exercise of ascertaining as to how the sale consideration has to be bifurcated between land and built up area of flats. In flats/multi-storied apartments/commercial complexes, the ownership consists of owning undivided share of land and built-up area and these together is the property. It has two components and ownership of both components of undivided share of land and ownership of building is necessary to complete title to a flat. Generally, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... identifiable capital asset even after construction of a building thereon. Identical views were taken by the Hon'ble Rajasthan High Court in the case of CIT vs Vimal Chand Golecha reported in [1993]201 ITR 442 and by the Hon'ble Madras High Court in CIT vs Dr. D. L. Ramachandra Rao [1999]236 ITR 51. However in order to claim the above capital gains separately for land and building, the assessee is required to give basic details like the original cost of acquisition of land and building, the year acquisition etc separately duly supported by necessary documentary evidences as they may be required at the time of scrutiny assessment. Based on the holding period of these assets, the capital gain is long term or short term and the indexed cost of acquisition could be computed. Likewise in order to claim the indexed cost of improvement necessary documents in support of the improvements done and the expenditure incurred thereon have to be also maintained by the assessee. 19. The next question is how to appropriate the sale consideration for the transfer of land and building if a lump-sum monetary consideration is received by the transferor from the transferee when the transfer is effected ..... X X X X Extracts X X X X X X X X Extracts X X X X
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