AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2015 (1) TMI 649
X X X X Extracts X X X X
X X X X Extracts X X X X
.... profit on the sale would be assessable under the head 'Long term Capital Gains' as had been returned by the assessee. 3) On the facts and in the circumstances of the case, the Learned CIT(A) grossly erred in failing to appreciate that the assessee had made purchases evidently with the intention of using the plots as stock-in-trade and the sale of such plots could only be seen as business transaction. 4) On the facts and in the circumstances of the case, the Learned CIT(A) erred in failing to appreciate that after purchasing the plots the assessee had also developed the same and therefore, it could not be said that the plots had not been intended as stock-in-trade. 5) On the facts and in the circumstances of the case, the Learned CIT(A) grossly erred in deleting the addition of Rs. 31,27,500/- made in the assessment with reference to the advance from M/s. Mantri Construction shown by the assessee as a liability to this concern, merely on the technical ground that the transaction to which the above advance pertained, i.e. transfer of a property at Shivajinagar, had taken place in March 1997 and, therefore, section 2(47)(v) which came into effect from 1/4/1998 would not ap....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n sale of plots at Kondhwa, Pune amounting to Rs. 35,35,016/- . For various reasons, the Assessing Officer disagreed with the assessee that the transaction of sale of plots at Kondhwa was to be assessed as capital gains. 6. Firstly, as per the Assessing Officer, the assessee acquired the development rights in the said plots in terms of the agreement dated 07- 02-1995 with the owners of the plot. Secondly, the Assessing Officer noted that the said purchase of development rights of the plots was reflected in the financial statements of his proprietary concern M/s. Sanas Builders. Thirdly, as per the Assessing Officer, agreement to purchase the development right in the above plots was entered into by the assessee in the capacity of a builder. Fourthly, the Assessing Officer concluded that assessee purchased the development rights for the purpose of acquiring stock-in-trade for the business of his proprietary concern, on which assessee had carried out development work prior to its sale. Fifthly, it was noted by the Assessing Officer that at the time of purchase the plots were in Agricultural Zone and subsequently converted into Residential Zone and that the assessee also obtained a No....
X X X X Extracts X X X X
X X X X Extracts X X X X
....laimed by the assessee that the land was sold as it was acquired and in the interregnum no development activity was carried out. With respect to the acquisition by way of purchase of development rights, assessee submitted that it was a purchase of plots simplister, but it was carried out as a purchase of development rights in order to save on the registration charges payable. In any case, it was pointed out that the agreement did not envisage any development of plots by the assessee and indeed there is no material to suggest that any development activity was carried out on the said property before its sale by the assessee. It was also pointed out by the assessee that a major source of income for the past decade was the rental incomes as was evident from the respective returns of income, and the business of construction was very less. The CIT(A) has accepted the aforesaid pleas of the assessee. 9. Before us, the Ld. Departmental Representative appearing for the Revenue has primarily relied upon the reasoning taken by the Assessing Officer in the assessment order which we have already narrated in the earlier paras, and is not being repeated for the sake of brevity. The Ld. Departmen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to discharge the burden cast on him that the impugned income was liable to be assessed as 'capital gains'. We have inferred the above based on the parity of reasoning laid down by the Hon'ble Supreme Court in the case of Saroj Kumar Mazumdar (supra). 11. In this background, we may now examine the facts of the present case. In this case, as per the orders of the authorities below and the material on record, it transpires that assessee purchased four portions of a larger piece of land by four separate agreements in February and April, 1995. The assessee acquired the land by way of a 'development agreements' and such an acquisition was reflected in the Balance Sheet of the proprietary concern as 'Investments'. Since the time of acquisition and upto its sale during the year under consideration, i.e. for a period of 7 years, the said property was reflected as investments in the Balance Sheet of the proprietary concern. On this aspect, there is no dispute but the Assessing Officer has observed that the property has been held as stock-in-trade. We are unable to appreciate the aforesaid assertion of the Assessing Officer as the same is not based on any material on record. Notably, in the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion as a 'development agreement' by itself is not conclusive to say that the intention of the assessee was to treat the said purchase as a purchase of stock-intrade. The factual matrix which has prevailed during the period of holding of land by the assessee for 7 years does not suggest that any development activity was carried out on this land. The findings of the CIT(A) are on the above lines, and in our view the same cannot be faulted. The assertions of the Assessing Officer to the contrary are mere bald assertions. At this point of time, we may also notice a pertinent point brought out by the assessee before the lower authorities which is to the effect that though plots in question were shown in the Balance Sheet of the proprietary concern as investment, yet the payment for acquisition was made from the personal bank account of the assessee. The assessee pointed out the aforesaid feature to bring out his intention at the time of purchase of the property, which according to him, was acquired for the purpose of Investment. In our view, it is quite well understood that a builder/dealer in real estate can also make investments for capital appreciation, as distinct from purchase of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....elopment activity on such lands by the assessee and therefore it cannot be said that the aforesaid aspect shows the intention of the assessee to hold the said property as a stock-in-trade. For all the above reasons, in our view, the facts and circumstances of the case made out by the assessee establish that the intention of the assessee for acquiring the aforesaid property was to hold it as 'Investment' and not as 'stock-in-trade'. Therefore, in our view, the CIT(A) made no mistake in holding that the gain on sale of such property is liable to be assessed as income from capital gains and not as a business income. Thus, we affirm the order of the CIT(A) on this issue and accordingly Revenue fails in its appeal. 14. The other Ground in this appeal relates to an addition of Rs. 31,27,500/-. The relevant facts in this context are that assessee was found to have entered into an agreement to sale dated 02-03-1987 with respect to a property situated at Shivajinagar, Pune whereby assessee transferred his right, title and interest in the said property to M/s. Mantri Constructions for a stated consideration of Rs. 31,27,500/-. Assessee had since received a sum of Rs. 29,77,248/- and the bal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....- receivable was also held to have accrued to the appellant. A mere agreement to sell may be construed as transfer, when accompanied by possession in view of the extended definition of transfer under section 2(47) of the Act. Where the agreement provides for sale to the nominee of the vendee in circumstances, where there is also no transfer of possession, even where there is possession, there is no sale, since the date of sale cannot be anterior to the date of execution of the deed of conveyance as held in Meccane Industries Ltd. vs. CIT reported in 254 ITR 175(Mad.). In this case, the conveyance was executed to a nominee, a third party, seven years later. The extended meaning of transfer to include possession within the meaning of section 53A of the Transfer of Property Act, 1882, was assigned by the Finance Act, 1987, with effect from the assessment year 1988-89. Both the date of agreement as well as date of execution in the case before the High Court was prior to the amended definition, so that there was little difficulty in deciding the issue with reference to the pre-existing law, that the transfer could be inferred only on conveyance on the basis of the decisionin Alapati Ven....