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TMI Blog1980 (2) TMI 111X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee offered the highest bid and hammer fell at the bid of Rs. 1,04,000. As per the conditions of sale, 1/4th of the price was to be paid straightaway which was done by the assessees (co-owners). On 28th Aug., 1967, the Estate Officer made allotment of the said plot to them. The assessees were given possession factually on 23rd Oct., 1967 as per letter dt. 5th Sept., 1967 appearing at page 34 of the assessees' paper book. The remaining three instalments for the purchase consideration were paid by the assessees by 1st Aug., 1970. In other words, as on 1st Aug., 1970, the entire purchase consideration stood paid by the assessee in accordance with the terms of the auction held on 23rd July, 1967. 3. On 1st/2nd March, 1972, the Estate Officer executed conveyance deed in favour of the assessees. On 2nd March, 1972, after getting the property conveyed by a registered deed, the assessees sold this property to one Gurbinder Singh and others for a sum of Rs. 2,02,000. We would like to clarify here that conveyance deed as appearing at pages 17 to 19 in the paper book filed by Saroj Bala and at pages 20 to 22 in the case of Kiran Bala is not very clear about the date of its execution as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itle or interest in the property. Thus it was argued that unless the assessee had got the proprietary rights in the plot, right from the date of auction, these conditions became meaningless. The effect of the unpaid amounts becoming the first charge on the property shall also be, it was contended, that the assessee were the owners because charge is always something with respect to the property of another. He then referred us to the provisions of ss. 3 and 9 which according to him, made it clear that the highest bidder became the owner of the property at the fall of the hammer. In this regard, he invited our attention to the Supreme Court judgment in the case of Jagdish Chand Radhey Sham (1). The learned Counsel for the assessees stated that the assessees were the owners w.e.f. the date of the auction i.e. 23rd July, 1967 and, therefore, sale affected on 2nd March, 1972 was after more than the statutory period necessary to make the asset a capital asset from the sale of which long-term capital gains would arise. 6. However, he submitted that with the judgment of the Supreme Court, the rights of the Government were adversely affected. Therefore, the Capital of Punjab (Development ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , according to him, protected the interest of the vendee in so far as he could enforce the transaction and the section worked as an estoppel against the vendor backing out of the transaction. He also cited the authorities of Liquidators Hubli Electricity Co. (9) and Lalitaben Gulab Chand and Others. (10) 8. These submissions were opposed by the Revenue with the contention that the gains are actually a business profit but in the alternative, it was submitted, these are short-term capital gains because prior to the registered conveyance deed, the assessee had certain rights against either the Estate Officer or the plot of land but became owners of the plot only on the registration of the deed on 2nd March, 1972. According to the Revenue, before that the assessees did not "hold" the capital asset. The plot came actually to the assessee only on 2nd March, 1972. For this, reliance was placed upon the ratio of the Gujarat High Court judgment in the case of Chunilal Khushaldas. (8) It was submitted that even the Supreme Court in its judgment in the case of Jagdish Chand Radhey Shyam, cited by the learned Counsel for the assessee, considered the rights in respect of ownership of rights ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. The ITO had considered the difference between the sale proceeds of the property and the cost of acquisition thereof, and some other expenses incurred on the foundational construction, as business income. In appeal, the AAC held that the profit was actually out of a transaction which was in the nature of trade. Arguing on this aspect of the matter, the learned Counsel for the assessee, Shri Naresh Batra, submitted that the case of Saroj Bala has been considered by the ITO alongwith the case of Kiran Bala and the main order is made in the case of Kiran Bala by him. But the AAC made the main order in the case of Saroj Bala. He submitted that the Revenue is alleging that the difference is income arising out of a transaction which is in the nature of trade. In other words it was submitted that the transaction of sale of immovable property has been held to be as an adventure in the nature of trade. He submitted that to establish whether there was an adventure in the nature of trade, the Revenue has to discharge the onus which squarely lies on its shoulders and to see whether the sale of the asset was in fact an adventure in the nature of trade, the intention of the parties has to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an asset and not as a stock in trade of business. Therefore, there was no question of any adventure in the nature of trade from which any income accruing and arising could be taxed. 14. The Revenue opposed these submissions strongly and submitted that it is unexceptionable proposition that the burden of proving a particular transaction as being of the character of adventure in the nature of trade is on the Revenue but, it was contended, the burden has been discharged. It was also submitted that the intention has not, only to be seen at the time of purchase of the property but to be examined even on the basis of post sale facts in view of the Supreme Court judgments in Dalmia Cement Ltd. (18) and P.M. Mohd. Meerakhan. (19) The ld. Departmental Representative submitted that Smt. Saroj Bala was not in a position to construct the plot when she purchased it as she had certain other liabilities. She had agricultural land, the value thereof as indicated by her in her subsequent statements was only Rs. 16,000 and that would not be sufficient to construct the property. The dominant intention of the assessee was that of treating the property for purposes of sale and, therefore, the income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otment. No. 704/CP/1718 dt. 29th Aug., 1967 and we consider it necessary to incorporate the entire letter in this order. This letter is as under: "Subject: Allotment of commercial sites at Chandigarh. Memorandum Reference your bid at the auction held on 23rd July, 1967. The following commercial site is hereby allotted to you on the conditions mentioned hereunder: Sector Serial No. of the site Dimension 17-C 60,61 62 17'-3"X104'-11" each Area in sq. yards Price Trade 201-09 each 1,04,000 general 3. The sum of Rs. 26,000 paid by you as earnest money has been adjusted against the price of the site. 4. The area dimension shown above are as given in the respective lay out plan and subject to variation at the time of actual possession. 5. The sale shall be deemed to have taken effect from the date of auction from which date interest at the rate of 6 per cent p.a. shall be charged on the 75 per cent of the price. The balance of 75 per cent can be paid in lumpsum within 30 days of the date of auction without interest or with 6 per cent interest in 3 equated annual instalments in accordanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding in Form (D) annexed to Punjab Capital (Development and Regulation) Act, 1952 accompanied by the completion certificate from the Registered Surveyor/Qualified Architect who supervised the construction of the building, provided building is also certified to have been completed according to the sanctioned plan by the Chief Administrator. 16. The site and the building constructed thereon shall be used only for the purpose for which it is actually sold i.e. general. 17. The booth/shop-cum-flat constructed on the site sold for general trade will be a booth where trades, except those in which use of fire, cooking or manufacture or repair of furniture, car or cycle, sale of fruit and vegetable and fish or any trades which are likely to be objectionable to neighbourhood or which may cause in obstruction in the public passage can be carried out. 18. The shop-cum-flat constructed on a site sold for general services industries can be used only for the installations of small scale industries except Chakki or such like heavy machinery which is likely to vibrate the building. The sale or display or repairs of motor cars or other vehicles, agricultural machinery or maintary works etc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to some other reasons, not brought to our notice, this section stood amended as under on the State book on the date of hearing before us: "3(1) Subject to the provisions of this section, the Central Government may otherwise transfer, whether by auction, allotment or otherwise, any land or building belonging to the Government in Chandigarh on such terms and conditions as it may, subject to any rules that may be made under this Act, think fit to impose. (2) The consideration money for any transfer under sub-s. (1) shall be paid to the Central Government in such manner and in such instalments and at such rate of interest as may be prescribed. (3) Notwithstanding anything contained in any other law for the time being in force, until the entire consideration money together with interest or any other amount, if any, due to Central Government on account of the transfer of any site or building, or both, under sub-s. (1) is paid, such site or building, or both, as the case may be, shall continue to belong to the Central Government." The important thing to note is that the newly introduced sub-s. (3) makes material change in the rights of the allottees qua the Government. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be paid as prescribed, that the unpaid portion of the consideration money will be first charge on the site or the building, that the transferee except with the previous permission in writing of the Estate Officer shall not be entitled to sell or mortgage or otherwise transfer any right, title or interest in the site etc. and thus s. 3 totally repeals the conclusion arrived at by the High Court that the Government remains the owner until the entire consideration money is paid. The Hon'ble Supreme Court further pointed out that a charge is created for the unpaid portion of the consideration money and there is prohibition against sale, mortgage or transfer by the transferee and if the Government were the owner, it would not be said that the transferee could sell, mortgage or transfer any right title or interest. The Hon'ble Supreme Court made it clear that the Government cannot after sale remain the owner and the statute forbids such construction. 24. It is clear from the relevant facts before us and the law applicable thereto that but for the amendment brought about by substitution of sub-s. (3) of s. 3 of the Capital of Punjab (Development and Regulation) Act, 1952, by the Centra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r and the requisite condition of payment of 1/4th of the consideration was fulfilled by him. Now the change brought about by the substituted sub-s. (3) of s. 3 is that notwithstanding anything contained in any other law for the time being in force, until the entire consideration money together with interest or any other amount, if any, due to the Central Government on account of the transfer of any site or building, or both, under sub-s. (1) is paid, such site or building, or both, as the case may, be, shall continue to belong to the Central Government. Even the substituted sub-section which we have just analysed, clearly shows that the only additional condition that is necessary for an allottee to become owner now is the full and complete payment of the entire consideration money together with interest or any other amount due to the Central Govt. 26. If this criterion given in the statutory provisions itself is to be applied to the facts of the case, it would be clear that the amended provisions do not apply to the case before us. In fact the assessees had become the owners from the date of the auction and after payment of 1/4th of the purchase consideration on that date in vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le. 29. The consideration whether the gain arising out of the transaction is from a short-term capital asset is to be made into as of s. 2(42A) which speaks of a capital asset "held" by an assessee for a certain statutory period to acquire the character of a long-term capital asset. This definition in fact is regarding the short-term capital asset and unless an asset is held by an assessee for more than 60 months immediately preceding the date of its transfer, the asset is a short-term capital asset. This provision came up for consideration by Their Lordships of the Gujarat High Court in the case of Chunilal Khushaldas (8), and this is how they interpreted it at page 379: "Moreover, it must be remembered that the word "held" is used in s. 2(42A) with reference to any capital asset. It is not limited to shares. The concept of a registered holder cannot, therefore, be introduced in the construction of the section. So long as the bonus shares are beneficially owned by the assessee, whether in his own name or in the name of another, they would be held by the assessee with the meaning of s. 2(42A). The extreme contention of the Revenue seeking to read the word "held" as meaning "h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the AAC and his order is under challenge only at the instance of the assessee before us and, therefore, the issue for decision is whether the transaction was an adventure in the nature of trade and we have already shown supra that in such a case the burden lies on the Revenue to prove so. Now we have to see whether on the facts before us, this onus of proof has been discharged or not. 32. These co-owners acquired the property on 23rd July, 1967 as discussed supra and thereafter paid the requisite instalments as required by the terms of the sale. Even the construction on the plot had been undertaken as far back as 1970 because a revision petition was filed by the assessee under s. 10(4) of the Capital of Punjab (Development and Regulation) Act, 1952 against an order dt. 17th Nov., 1970 made by the Chief Administrator, Capital Project, Chandigarh, restoring the site after forfeiting 5 per cent of the amount paid for it and allowing extension for completion upto 30th June, 1971. After considering the contention of the petitioners before him, the Chief Commissioner, Chandigarh, recorded that the Building Inspector's report dt. 25th Feb., 1971 showed that "the digging work for the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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