TaxTMI 
TaxTMI 
2014 (7) TMI 995
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....pite the fact that the assessee Shri Rama Gameti was a domestic servant of Shri Manmohan Raj Singhvi and thus not at all engaged in business of purchase and sale of property and despite the fact that the said transaction of sale of land that too to one concern namely S.S. Education Trust controlled by Shri Manmohan Raj Singhvi was the only isolated and the single transaction." 2. From the above grounds, it is gathered that the grievance of the department in this appeal relates to the direction of the ld. CIT(A) to the Assessing Officer to assess the income in the hands of the assessee from sale of land on substantive basis and treat the said income under the head profit and gains from business instead of capital gain. 3. Facts of the case in brief are that the assessee filed the return of income declaring an income of Rs. 1,09,590/- on 22/10/2010. Subsequently, the Assessing Officer issued a notice u/s 148 of the I.T. Act, 1961 (hereinafter referred as the Act) by recording the reasons. In response to the said notice, the assessee stated that the return already filed on 22/10/2010, may be treated as having been filed in response to the notice issued u/s 148 of the Act. however, t....
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.... page No. 125 to 129 of Annexure A-49. Page No. 101 to 121 of Anx-A-46 contains the copy of three sale deeds, all of them dated 15.07.2005 executed between Sh. Rama Bhil (seller) and S.S. Education Trust (purchaser). In all these three deeds the sale consideration has been declared at Rs. 465000/- each, however the Sub Registrar has taken the value of these lands at Rs. 2320000/-, 2319840/- and Rs. 2319840/-, totaling to Rs. 6959680/-, as against declared total sale consideration of Rs. 1395000/-. So there is difference of Rs. 5564680/-, taxable under section 50C of the IT Act. 8.1 Page No. 125 to 129 is a copy of sale deed dated 13.09.07 executed between Sh. Rama Bhil (seller) and S.S. Education Trust (purchaser). The sale consideration has been declared at Rs. 992000/-, against sale of 156880.8 sq. ft. of residential land. However, this copy of sale deed does not contain the copy of backside of the page bearing the stamp of valuation adopted by the Sub Registrar. But considering the above three sale deeds it evidences that DLC rate in this area is Rs. 40 per Sq. ft. Therefore, the DLC price of this land must be around Rs. 6275232/- as against declared sale consideration of Rs. 9....
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....ned unsecured loans from various .sources including loans from the assessee's family. d. The intention of the assessee was to help his trusted employee in his business venture because of his faithful services and enable him to earn additional income from this business venture. 8.5 The submission of the assessee was considered carefully but no merit is found. Shri Manmohan Raj Singhvi has established an Engineering College in the name of S.S.Engineering College under the aegis of S.S.Education Trust which is a registered society and also registered u/s. 12A(a) of the Income-tax Act. The registered address of the trust is 222/17, Saheli Marg, Udaipur that is the residence of Shri Mammohan Raj Singhvi. This college was at the verge of completion of constructions at the time of search. 8.6 On analysis of seized material it is found that Shri Manmohan Raj Singhvi has used the name of two of his domestic servants namely Shri Rama Gameti and Smt. Laxmi Bai Bhil to purchase the land belonging to Schedule tribes and converted the same to residential nature from agriculture nature. During the search some pay in slips in the name of Laxmi Bai and copy of purchase/sale deeds in the name....
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....ri Rama Gameti was recorded on 25.10.2010. 8.11 From the above statements, it is gathered that Shri Rama Gameti was not aware about the consideration of land purchase and sale transaction except the transaction of sale and purchase made in his name by his employer Shri Manmohan Raj Singhvi, it is also gathered that Shri Rama Gameti's source of income is only salary received from assessee Shri Manmohan Raj Singhvi and besides it, he has no other income and not indulged in business of properties. Further, the assessee claimed that he has given unsecured loans to Shri Rama Gameti for these property transactions. But in his statement, Shri Rama Gameti has categorically denied to have any business transaction with the assessee, his family members and their business concerns. He also denied taking any unsecured loan from any of the persons in last 5 to 6 years. He also admitted that the bank account opened by his employer was not maintained by him and his employer only took his signature on some pages from time to time. On being asked, he also replied that he was not aware about transaction made in his bank account. Shri Rama Gameti also admitted that he has no objection with statem....
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....Copy of Valuation report dated 7.11.2007 given by Sh.B.LMantri, Registered Valuer of the property owned by S.S.Education Trust at Village Umarda, stating the total value of land at Rs. 293.40 lacs (24.45 Bigha @ Rs. 12 lacs per Bigha). Another copy of valuation report dated 7.11.2007 given by Sh.B.LMantri, Registered Valuer of the property own by S.S.Education Trust at village Umarda, stating the total value of land at Rs. 296.25 lacs (23.7 Bigha @ Rs. 12.50 lacs per Bigha). The valuation report of the land purchased by S.S.Education Trust from Sh.Rama Bhil vide three sale deeds discussed in page No. 101 to 121 ofAnnexure AS-46 found and seized at the office of Sh.Babu Lai Motawat at 1, Town Hall Link Road, Udaipur. As per this report the valuation of the land purchased by the S.S.Education Trust for a consideration of Rs. 13,95,000/- has been done at 293.40 Lacs. This fact further strengthens the issue for taxing the above transaction u/s 50C. 8.14 Similarly, a reference for valuation of property was made by this office to DVO, Jaipur and DVO, Jaipur vide his valuation report 19.11.2010 has also valued the cost of land at Rs. 1,32,34,912/-. This fact is supported to determine the....
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....g authority is made conclusive by law.......... It is held by the Hon'ble Supreme Court in the case of Sumati Dayal vs. C.I. T. in 214 ITR 801 that In such a case there is, prima facie, evidence against the assessee, viz., the receipt of money, and if he fails to rebut it the said evidence being unrebutted, can be used against him by holding that it was a receipt of an income nature. While considering the explanation of the assessee the Department cannot, however, act unreasonably. .........This, in our opinion, is a superficial approach to the problem. The matter has to be considered in the light of human probabilities. The Chairman of the Settlement Commission has emphasized that the appellant did possess the winning ticket which was surrendered to the Race Club and in return a crossed cheque was obtained. It is, in our view, a neutral circumstance; because if the appellant had purchased the winning ticket after the event she would be having the winning ticket with her which she could surrender to the Race Club. The observation by the Chairman of the Settlement Commission that "fraudulent sale of winning tickets is not an usual practice but is very much of an unusual pract....
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.... capacity to purchase this land as he was getting only salary of Rs. 600/- p.m. at the time of transactions). Therefore, from the circumstances, it is apparent that all the transactions allegedly made in the name of Shri Rama Gameti were executed by Shri Man Mohan Singhvi i.e. the actual money holder. Hence the provisions of section 50C in respect of capital gain are liable to invoke in the case of the assessee as it is more than clear that Shri Rama Gameti and Smt. Laxmi Bai are persons of petty means having no financial capacity to purchase the said land in question lest sale the same. 8.17 From the above, it is established fact that there is a capital gains of Rs. 1,08,47,912/-accruing to Shri Rama Gameti (Bhil) on the said transfer of Residential land to S.S.Education Trust which is taxable u/s.50C of the I.T.Act. It is worthwhile to mention here that the aforesaid land was got valued by the S.S.Education Trust by a Registered Valuer, who valued it at Rs. 296.25 lacs (Page No.46 to 49 of Annexure AS-10 from office at Bai Ji Ram Ka Kund, Inside Delhi Gate, Udaipur). As discussed above, Sh. Rama Gameti is a man of no means and is a domestic servant of Sh. Manmohan Raj Singhvi. A....
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....nd not of Shri Manmohan Raj Singhvi. On the basis of documentary evidence placed on record, it is quite manifest that the assessee could not be called as benamidar of Shri Manmohan Raj Singhvi. 3.5 It is submitted that the honourable Jodhpur Bench of Income-tax Appellate Tribunal held in the case of Shri Manmohan Raj Singhvi [I.T.A.No. 236/Jodh/2013 dt.07.06.2013] that Shri Rama Gameti was not a benamidar of Shri Manmohan Raj Singhvi and it deleted the entire addition on account of capital gains made on substantive basis in his case. The copy of the order is enclosed herewith for your kind perusal. Annexure ". The relevant para of the judgement is reproduced as under: 3.15 We have considered the submissions of both the parties and gone through the materials available on record. In the present case, it is noticed that that Shri Rama Gameti, an employee of the assessee raised the loans amounting to Rs. 22.85 lacs from the following persons. S.N. Name of the party Amount (Rs.) Remark 1. ShriH.S. Ametha 18,000 Cash 2. Smt. Kamla Mehta 18,000 Cash 3. Shri Sunil Mehta 18,000 Cash 4. ShriP.R. Bhandari 18,000 Cash 5. Shri Veni Ram 18,000 Cash 6. Shri Mohan Lai 10,000 Cash ....
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....M/s. S.S. Education Trust, a public charitable organisation. We therefore, are of the view that the Assessing Officer was not justified in holding that the land in question was a benami asset of the assessee and capital gain., if any, was to be assessed in the hands of the assessee. In the present case, when it has been held that the land in question was not related to the assessee at all, we do not consider it necessary to discuss as to whether the profit on sale of land should be treated as business profit in the hands of the assessee or provisions of Section 50C were applicable because the said facts are to be considered in the hands of the original owner of the land i.e. Shri Rama Gameti who purchased the land by raising the loans and sold the land to M/s. S.S. Education Trust and earned profit. We therefore, by considering the totality of the facts of the case as discussed hereinabove delete the impugned addition made in the hands of the assessee by the Assessing Officer and sustained by the Id. CIT(A). 3.6 As regards the apex court cases viz. CIT Vs. Durga Prasad More in 82 ITR 540 and Sumati Dayal Vs CIT in 214 ITR 801 relied upon by the assessing officer, it is submitted t....
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....e in an adventure may vary both in quality and quantity. The business characteristics or the business elements which exist in one adventure may not exist in another, and the characteristics which are in fact present might vary from one adventure to another. So, courts have observed that it is difficult to frame a formula which would be applicable to whatever state of facts, so as to determine whether a given activity is or is not an 'adventure in the nature of trade'. Each case would have to be examined on its own facts". 3.9 The honourable Supreme Court held in the case of Janki Ram Bahadur Ram vs. C.I.T. (57 ITR 21) "It is for the Revenue to establish that the profit earned in a transaction is within the taxing provision and is on that account liable to be taxed as income. The nature of the transaction must be determined on a consideration of all the facts and circumstances which are brought on the record of the IT authorities. It has consistently been held by this Court that the question whether profit in a transaction has arisen out of an adventure in the nature of trade is a mixed question of law and fact.' It was further observed: '........the question whether ....
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....sisting of purchase and resale, though profitable, are clearly outside the domain of adventures in the nature of trade. In deciding the character of such transactions several factors are relevant, such as, e.g. 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; the nature and quantity of the commodity purchased and resold; any act subsequent to the purchase to improve the quality of the commodity purchased and thereby make it more readily resalable, any act prior to the purchase showing a design or purpose, the incidents associated with the purchase and resale; the similarity of the transaction to operations usually associated with trade or business; the repetition of the transaction; the element of pride possession. A person may purchase a piece of art, hold it for some time and if a profitable offer is received sell it. During the time that the purchaser had its possession he may be able to claim pride of possession and aesthetic satisfaction; and if such a claim is upheld that would be a factor against the transaction being in the nature of trade. The presence of all these relevant f....
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....ufacture". Even a single venture may amount to business, and the profits of such a single venture may be taxable as income arising from business. An isolated transaction of purchase and sale of land, even if it is not business as it is normally understood, may be business within the scope of the definition, an adventure in the nature of trade. An isolated transaction of purchase and sale of land may be a speculation. Every speculation is an adventure; but unless it is an adventure in the nature of trade, the profits therefrom will not be income assessable to tax. Where, the purchase and resale of landed property constituted an isolated transaction, it is a matter of extreme difficulty to determine whether this was an adventure in the nature of trade. Though a dominant or even a sole intention to resell is not by itself conclusive proof, it is certainly a relevant factor in deciding whether the transaction of purchase and resale was an adventure in the nature of trade, and in conjunction with other circumstances including the conduct of the assessee, such an intention might well establish beyond doubt that the adventure was in the nature of trade. Courts have never treated such a ....
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.... Rs. 81,500/- inclusive of the advance of Rs. 11,000/- paid by him. In other words, the assessee had a financial benefit to the extent of Rs, 1,26,500/-. The department and the Tribunal have taken the view that the amount of Rs. 1,26,500 mentioned above-rounded off to Rs. 1,25,000-represents the profit of the assessee from an adventure in the nature of trade and is hence assessable to income-tax under the Indian Income-tax Act, 1922. The sole question for determination is whether that view is justified on the facts and circumstances of the case. Question referred: "Whether, on the facts and in the circumstances of the case, the transactions constituted a venture in the nature of trade and the surplus of Rs. 1,25,000 was assessable to tax"? Judgement Section 6 of the Indian Income-tax Act, 1922, specifies the heads of income chargeable to income-tax. Profits and gains of business come under the fourth of the six heads specified in that section. The expression "business" is defined in section 2(4) of the Act. According to that definition it includes "any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture". ....................
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....ual cost from the sale proceeds. Held Normally when a purchaser purchases land, the purchase represents investment of money in land, and the subsequent sale thereof with profit cannot be assumed to be an adventure in the nature of trade, But when the purchase is made solely and exclusively with the intention to resell at a profit and the purchaser had no intention of holding the property for himself or otherwise enjoying or using it. there is a strong presumption that the transaction is an adventure in the nature of trade. Having regard to the facts and the circumstances of the case, it was apparent that the real intention of the assessee in acquiring the land was not to retain it for himself but to resell it at profit and as such the transaction was an adventure in the nature of trade. The conclusion of the Tribunal was, therefore, correct. 3.14 The honorable Karnataka High Court held in the case of C.I.T. Addl Vs. Chikka Veerayya Lingaiah (164 ITR 41) that In a number of cases the Karnataka High Court has held that if an assessee purchased land, converted the same into house sites and sold the same for attractive prices, then his transaction may be stamped with the character....
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....lej Cotton Mills Supply Agency Ltd. [100 ITR 706(SC)] and held on the facts that the assessee carried an adventure in the nature of trade and profit arising from sale of shares was assessable as business income and not capital gains. In this case, the shares were purchased with borrowed funds. The tribunal also referred to the judgement of Ashok Kumar Jalan Vs. C.I.T. [187 ITR 316 (Bom)] wherein it was held that acquisition of large block of shares when the assessee had no ostensible means to pay for it constituted trading transaction. 3.16 To decide the controversy of business income vs. capital gains in the case of the assessee, the following factors are relevant: (a) He purchased agriculture land out of borrowed funds, (b) He got the agriculture land converted into non-agriculture land and (c) He sold the impugned non-agriculture land immediately after its conversion. On consideration of the above factors and conduct of the assessee, it clearly emerged that the intention of the assessee at the time of purchase of land was not holding it as a matter of pride of possession and enjoy its return but to sell it and earn profit. It was clearly an adventure in the nature of trade ....
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....n-trade which finds corroboration from its balance sheet. Stock-in-trade has been excluded from the definition of 'capital asset.' According to the Webster's New International Dictionary, the 'stock-in-trade' is the 'goods kept for sale by a shopkeeper'; the fittings and appliances of a workman'. In other words, the stock-in-trade includes all such chattels as are required for the purposes of being sold or let to hire on a person's trade. According to Stroud's judicial dictionary, stock-in-trade comprises of all such chattels as are required for the purposes of being sold, or let to hire on a person's trade. [Para 13]. The Commissioner (Appeals) and the Tribunal on analysis of the facts of the case have reached to the conclusion that section 50C has no application as it was a case of transfer of plots which was stock-in-trade. An income earned from such transaction is liable to be taxed as income from business activity. Section 50C also uses the words 'capital asset'. For applicability of section 50C, the essential requirement is that an asset should be capital asset. Alternatively, the finding recorded by the Tribunal which is l....
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....se words when the law or particular provision was enacted ? Normal rule of interpretation is that, if the language is very clear, then the provision is to be interpreted in its ordinary, popular and natural meaning. It is also well-settled principle that, when the language of the statute is plain and explicit and does not admit of any doubtful interpretation, the Court cannot expand the meaning of the words used by the Legislature. So far as section 50C is concerned the language of the said section is so clear in respect of its intention that it is brought on the statute book by way of deeming provision in the nature of the Explanation to section 48. [Para 9.2] Moreover, it is abundantly clear from the explanation given in the CBDT Circular No. 8 of 2002, dated 27-8-2002 that the basic intention to insert section 50C was for the purpose of determining full value of sale consideration for the purpose of computation of capital gains under section 48. It is well-settled rule of interpretation that meaning ascribed by the authority, issuing notification of circular, is good guide of contemporaneous exposition of the position of the law and this rule is popularly known as 'contempo....
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....ggest that the property was purchased for a longer period. The Ld. CIT(A) accordingly held that the activities as carried out by the assessee were business activities and the assessee purchased the land out of borrowed funds, got it converted into non-agricultural, sold it immediately after non-agricultural conversion, realised the sale proceeds and repaid the loans which showed that he had no intention to hold the land as investment. Therefore, the provisions of capital gain could not apply. The Ld. CIT(A), accordingly, directed the Assessing Officer to assess the profit and gains from sale of land under the head profit from business on substantive basis. Now the department is in appeal. 7. The learned D.R. strongly supported the order of the Assessing Officer and further submitted that the assessee entered into a single transaction, therefore, the profit received on account of sale of the land was a capital gain and not income from business. Therefore, the Ld. CIT(A) was not justified in directing the Assessing Officer to treat the income of the assessee from sale of the land as income from business. Reliance was placed in the case of Gaurav Kumar Sharma Vs. ACIT reported in (20....