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TMI Blog2024 (11) TMI 1024X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessment proceedings the Assessing Officer noted that the assessee has sold her land at Survey No.150, Village - Charoli Bk. for a consideration of Rs. 9,60,00,000/-. He noted that the said land was never shown by the assessee in her wealth tax return as investment. Further, the said land was purchased by the assessee on 26.11.2007 for Rs. 6,21,90,000/- and after claiming cost of selling of Rs. 4,57,000/- and indexed cost of acquisition of Rs. 9,61,63,122/-, the assessee has shown long term capital loss of Rs. 6,20,122/-. The Assessing Officer further noted that the assessee is a partner / director in many concerns which are engaged in real estate business. She is regularly purchasing lands and selling them at high profits. Even in the earlier year relevant to assessment year 2012-13, the assessee has sold her open land situated at Survey No.36, Yeolewadi, Pune on 20.10.2011 for a sale consideration of Rs. 7,81,00,711/- and had shown as long term capital gain of Rs. 6,34,01,864/-. The assessee had claimed exemption u/s 54F of the Act which was disallowed in the assessment order. Thus, the assessee does these land sale-purchase transactions and termed them as investments inste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cost of acquisition to the appellant. 6.2 The assessing officer has made the addition by treating the sale of land as business income. The assessing officer has observed in his order that "On perusal of the facts surrounding this transaction, it is seen that the assessee is partner/Director in many a concerns which are engaged in real estate business. She is regularly purchasing lands and selling them at high profits. Even in the earlier year relevant to A.Y. 2012-13, the assessee has sold her open Land situated at Survey no.36, Yeolewadi, Pune on 20/10/2011 for a sale consideration of Rs. 7,81,00,711/- and had showed long term capital gain of Rs. 6,34,01,864/ out of the sale It was claimed to be exempt u/s. 54F however the said claim was disallowed in the assessment order. Thus, it is seen that the assessee does this land sale-purchase transactions and term them as investments (instead of stock in trade) for claiming profits thereupon as LTCG and either claims exemption u/s. 54F etc. (as done for A. Y. 2012-13) or ends up claiming capital loss by taking undue benefit of Indexation provisions (as done for A.Y. 2013-14), rather than offering the said profits to fax as her busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not arise. It is also to be appreciated that the claim of exemption u/s 54F which was denied in A.Y. 2012-13 was allowed by Hon'ble ITAT Accordingly, on the principle of consistency, the assessee submits that the leamed A.O should have accepted the claim of the assessee that the gain arising on sale of Charali land was assessable under the head "Capital Gain" ME TAX DEPART 8] The learned A.O. has further stated that the assessee is a partner/director in concerns which are engaged in real estate business. In this context, it is to be appreciated that simply because the assessee is a partner / director in concerns engaged in real estate business does not mean that the transactions entered into in her individual capacity or also to be considered as business income. It is a settled law that as individual can hold certain assets of the same class as an investment as well as stock in trade. For this proposition, the assessee places reliance on the following decisions 1. CIT v. Gopal Purohit [336 ITR 287 (Bom)] 2. CIT v. Yatish Trading Co. Pvt. Ltd. [359 ITR 320] 3. CIT v. Madan Gopal Radhey Lai [73 ITR 652] 9] In the present case, the assessee in her individual capacity has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intention was to keep the land as a owner of the property. 6.6 The Assessing Officer has further held that the appellant has purchased the land from borrowed fund. On this issue, the appellant contended that the said land was purchased by her from the money taken from LK Jain (HUF) wherein she is a member. It is also clarified by the appellant that she has not paid any interest on the said amount taken from LK Jain (HUF). Thus, it is not a case wherein the appellant has borrowed money from some outsider and paid interest. She has taken the money from the HUF of which she is a member and there is no payment of interest by her. Accordingly, there is no substance in the said issue raised by the Assessing Officer. 6.7 The Assessing Officer further holds in A.Y. 2012-13 also the appellant had sold her land and claimed exemption u/s 54F. The Assessing Officer has held that in A.Y. 2012-13, the claim of exemption u/s 54F was denied and according to him, the appellant carries out such transactions and offers the gain thereon as capital gain even though, the same is taxable as a business income. On this issue, the appellant argued that in Assessment Year 2012- 13, she has sold her land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant had held the same land for more than five years. No development activity has been carried out by the appellant on the said land. Thus there is substance in the claim of the appellant that she has held the land for more than five years. In this context, reliance is placed on the decision of ITAT Pune in the case of ITO v. Bajuio Investment Pvt.Ltd. [127TTJ 423] wherein the assessee own land jointly with another company. The assessee held the land for more than 10 years. However, the assessee had received sanction for development of the land. In that case, the assessee sold the land and had offered long term capital gain. The Assessing Officer had treated the same as a business Income. Hon'ble ITAT held that the assessee had not uridertaken any development activity on the said land and as the said land was held for more than 10 years, the gain arising was taxed as long term capital gain by Hon'ble ITAT. This decision of Hon'ble ITAT has been confirmed by Hon'ble Bombay High Court vide order dated 24.01.2013- ITA No. 998 of 2011. 6.12 The Assessing Officer has referred to the decision of Hon'ble Supreme Court in the case of G Venkataswami Naidu & Co. Vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee was indeed holding the said land as an investment instead of stock-in-trade merely for the reason that the said property was held by the assessee for a period of five years? 3. Whether on the facts and in the circumstances of the case & in the law, the CIT(A) has erred in allowing the contention raised by the assessee vis-à-vis treatment of gains / losses earned from the sale transaction of land without admitting the factual position that the assessee is engaged in real estate business and has been regularly selling/ purchasing lands? 4. Whether on the facts and in the circumstances of the case & in the law, the CIT(A) has erred in disregarding the decision of the Hon'ble Supreme Court in G. Venkataswami Naidu & Co. v/s CIT (35 ITR 594) wherein it has been held that if the asset was purchases solely and exclusively with an intention to resale at a profit it would be a strong factor indicating that the transaction is an adventure in the nature of trade? 8. The Ld. DR heavily relied on the order of the Assessing Officer and submitted that the CIT(A) / NFAC has not properly addressed the issue and has not given his finding on the issue of continuous buying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d once the shares sold were held by the assessee as investments, the gains arising out of the sale of investment were to be assessed under the head "capital gains" and not under the head "business profits". 11. Referring to the decision of the Pune Bench of the Tribunal in the case of JCIT vs. Adrus Estate and Properties LLP (2021) 130 taxmann.com 455 (Pune - Trib.), he submitted that the Tribunal in the said decision has held that where the assessee sold a land owned by it after holding it for a period of six years and same was shown as investment in its balance sheet and not as stock in trade and land was purchased out of its own funds and not out of borrowed funds, transaction of sale of land did not fall under the category of an "adventure in nature of trade" and, thus, profits arising on sale of land was to be treated as "capital gains" and not as "business income". 12. Referring to the decision of the Hon'ble Bombay High Court in the case of CIT vs. Gopal Purohit (2011) 336 ITR 287 (Bom), he submitted that the Hon'ble Bombay High Court in the said decision has held that it was open to the assessee to maintain two separate portfolios, one relating to the investment and anoth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the Assessing Officer has accepted the treatment given by the assessee. Since the CIT(A) / NFAC has passed a very detailed order, the same should be upheld. 15. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and the Ld. CIT(A) / NFAC and the paper book filed by both the sides. We have also considered the various decisions cited before us by both sides. We find the assessee in the instant case has sold her land at Survey No.150, Village - Charoli Bk. for a consideration of Rs. 9,60,00,000/- which was purchased by her on 26.11.2007 for Rs. 6,21,90,000/-. We find that after claiming cost of selling of Rs. 4,57,000/- and indexed cost of acquisition at Rs. 9,61,63,122/-, the assessee declared long term capital loss of Rs. 6,20,122/-. We find the Assessing Officer treated the sale of land as an "adventure in the nature of trade" and taxed the same as business income as against "long term capital gain" declared by the assessee on the ground that the assessee has not shown the said land in wealth tax return, the assessee is a director in various companies which are engaged in real estate business, the assessee is continuously sellin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee that the said loan cannot be termed as loan in real sense. 18. We further find that during the assessment year 2012-13 the assessee has sold a piece of land and offered the profit as long term capital gain out of which the assessee claimed deduction u/s 54F of the Act and which was denied by the Assessing Officer. However, when the matter travelled to the Tribunal, the Tribunal allowed the claim of deduction by the assessee u/s 54F of the Act. Thus, the claim of long term capital gain on account of sale of land in assessment year 2012-13 has been accepted by the Revenue. Similarly, for assessment year 2014-15 also, the claim of the assessee of capital gain on account of sale of land by the assessee was accepted by the Assessing Officer himself in the order passed u/s 143(3) of the Act. Merely because the assessee is a partner / director in the concerns which are engaged in real estate business does not mean that the transactions entered into in her individual capacity shall be considered as business income. 19. We find the Hon'ble Bombay High Court in the cash of CIT vs. Gopal Purohit (supra) has held that it was open to the assessee to maintain two separate portfolios i.e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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