TaxTMI 
TaxTMI 
2012 (5) TMI 136
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....e Princely State of Gwalior, purchased large tracts of land admeasuring about 2500 acres at Malad and Borivali in or about 1923. He died in 1936 and was survived by a son, E.F. Dinshaw, and a daughter, Bachoobai Woronzow, both of whom were nonresidents and were citizens of a foreign country. Upon the death of F.E.Dinshaw, his son and daughter became joint owners of the lands. No physical division was carried out. Under the last will and testament of F.E. Dinshaw, a life interest was created in half his share in the land in favour of his daughter, Bachoobai, a reversionary interest being created in favour of two U.S. based charities. By a judgment of this Court dated 21 December 1972, Mr.Nusli Wadia was appointed as sole administrator of the estate. The other half share was bequeathed to E.F.Dinshaw. 3. On 27 December 1973, Bachoobai leased out 72 acres of the lands jointly owned by her and her brother to a company by the name of Haven Kores Real Estate Pvt. Ltd. for a period of ninety nine years. On 28 December 1973, Bachoobai created three charitable trusts : (i) F.M.Dinshaw Foundation - with a corpus consisting of the reversionary interest of herself and the Administrator i....
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....1947 whereupon it became difficult to protect open land. In selling the land, the assessees had been motivated more by the desire of protecting their corpus than of earning profits; (iv) The assessees were Trusts or the administrator of the estate and could not enter into the business of selling land. 5. In appeal, the Tribunal has affirmed the decision of the CIT(A). The Tribunal has relied upon the following circumstances in support of its conclusion that the income that was realised upon the sale of the lands constituted capital gains and not business income: (i) Late F.E.Dinshaw had no intention to trade in the lands at the time of purchase. After the purchase of the lands in 1923, there was no sale thereafter for nearly thirtyfive years; (ii) Late F.E.Dinshaw was far removed from any business in real estate and, therefore, this was not a case where a transaction can be regarded as being relatable to the business which was normally carried on by the assessee; (iii) In the present case, there was no activity such as in the nature of improvements on the lands, for instance, by laying drainage lines, electricity, levelling or construction of roads. The fencing of the l....
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.... To accept the submission of the Revenue, would essentially imply that the Administrator of the Estate of E.F.Dinshaw, or as the case may be, the charitable trusts were engaged in business; (ii) There is a finding of fact concurrently both by the CIT(A) and by the Tribunal of the reasons why the land was required to be sold. The land involved extended over a large tract of 2500 acres which had been partly encroached upon and partly occupied by tenants and third parties. Though several sales had taken place that by itself could not determine the nature and character of the transactions. The order of assessment for Assessment Year 198990 notes in paragraph 4.3 that though there were 105 sales, in many cases sales were to persons who were already in possession of the property; (iii) The present Reference only deals with the lands which were dealt with by the Administrator of the estate of late E.F.Dinshaw; (iv) The lands in the present case were purchased by F.E.Dinshaw in or about 1923 and until his death in 1936, there were no sales. The lands were inherited by E.F.Dinshaw and by Bachoobai. The sales took place nearly sixty five years after the purchase of the lands. In these circum....
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....rectly part of it, an intention to launch upon an adventure in the nature of trade may readily be inferred. A similar inference would arise where a commodity is purchased and subdivided, altered, treated, or repaired and sold, or is converted into a different commodity and sold. Magnitude of the transaction of purchase, the nature of the commodity, subsequent dealings and the manner of disposal may be such that the transaction may be stamped with a character of a trading venture. But a transaction of purchase of land cannot be assumed without more to be a venture in the nature of trade." In G. Venkataswami Naidu & Co. vs. Commissioner of Income Tax 35 ITR 594 (SC), the Supreme Court noted that several factors assumed relevance including (i) Whether the purchaser was a trader and the purchase of the commodity and its resale were allied to his usual trade or business or incidental to it; (ii) The nature and extent of the transaction involved in the purchase and sale; (iii) Acts subsequent to the purchase for the improvement of the quality of the subject matter; (iv) Any act prior to the purchase showing a design or purpose, the incidents associated with the purchase and resale and....
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....her land since it had devolved on her through testamentary succession. The land was sold in parts because the huge area could not be sold in one transaction and such an activity was held not to amount to trade or business within the meaning of the Act. 12. These principles have again been succinctly summarised in the statement of law in Kanga and Palkhivala (supra) as follows: "Land and buildings.Where an individual inherits or otherwise acquires land and deals with it as an owner, he may be regarded as holding it as an investment rather than as something with which to trade(Dolores v. Comr of Taxation 82 ITR 272 (PC); CIT v Raunaq Singh 85 ITR 220; CIT v Thiagarajan 129 ITR 115; CIT v. Saraswati 137 ITR 656; IR v Reinhold 34 TC 389; Williams v Davies 26 TC 371, 15 ITR Suppl 50); and the same principle applies to a company incorporated for the purpose of management of a family estate (Ukhara v CIT 120 ITR 549 (SC). The mere fact that the owner of an immovable property takes steps to enhance its value before selling it, does not point to an adventure in the nature of trade (Taylor v Good 49 TC 277, 2967 (CA). A landlord may lay out part of his estate with roads and sewers and ....
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....lapati v CIT 35 ITR 73; Vadlamani v CIT 51 ITR 304; CIT v Nathalal 126 ITR 555)." 13. In assessing the facts of the present case, certain important considerations would have to be borne in mind. Firstly, a large tract of land of nearly 2500 acres was acquired in or about the year 1923 by late F.E.Dinshaw. F.E. Dinshaw was a Solicitor. The acquisition of the land was evidently not motivated by an adventure in the nature of trade. The statement of case makes it clear that there was no transaction involving the sale of the land during his life time. Secondly, neither E.F.Dinshaw, nor for that matter, Bachoobai purchased the land. The land had devolved on E.F. Dinshaw and upon Bachoobai by testamentary succession. Thirdly, upon the death of F.E. Dinshaw in 1936, there was no transaction involving the sale of the land for a period of nearly sixty five years since the purchase of the land. Fourthly, the assessee in the present case, is the Administrator of the estate of late E.F.Dinshaw. Half the interest of the land devolved upon E.F.Dinshaw under the will that was executed by his late father F.E.Dinshaw. Fifthly, both the CIT(A) and the Tribunal have rendered concurrent findings of ....