TaxTMI 
TaxTMI 
2017 (9) TMI 467
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.... this common order for the sake of convenience, by dealing with assessment year 2009-10. 2. The grounds raised in these Appeals are similar and common, except the different in figures, hence, for the sake of brevity, we are only reproducing the grounds in respect of assessment year 2009- 010 as under:- "1. Whether the Ld. CIT(A) has erred on facts and in law in deleting the addition amounting to Rs. 6,42,25,228/- made by the AO on account of amount received being adventure in the nature of trade. 2. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal. 3. The brief facts of the case are that the assess....
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....he assessee. The SEZ notification was made on 17.11.2008, however, thereafter as the SEZ notified areas had lost its demand no further action was taken in this respect by the parties concerned. 3.2 The AO was of the opinion that the amount of Rs. 6,42,25,228/- received as security deposit against lease by the appellant from Progressive is in fact an amount received against sale of land and held that because Progressive was, after obtaining the approval of SEZ notification, going to derive income from allotment of plots/shops/stalls and therefore the amount received as security deposit was on account of business and trading operations of the assessee and therefore taxable as a receipt on account of adventure in the nature of trade. AO add....
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....ditional submission filed before CIT(A) in regard to addition on account of security deposit; extract showing the receipt of Rs. 6,42,25,228/- as security deposit and copy of the bank statement; copy of the balance sheet of Mr. Vivek Khushalani as on 31st March, 2009 and copy of the balance sheet of Progressive Buildestate Pvt. Ltd. as on 31st March, 2009. 6. We have heard both the parties and perused the relevant records, especially the impugned order. We find that in this case, the assessee owned 22.2625 acres of land. His family members and Group Company also owned agricultural land aggregating to 60.0625 acres. The entire family got together and leased land to M/s. Progressive. It was the intention of the company M/s. Progressive to ....
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....ssive Estate Private Limited was to eventually earn from allotment of Plots & Shops/Stalls/such income will be essentially part of business and trading operation of assessee because it will be part of business Operations of M/s Progressive Buildestate Pvt. Ltd. (as the assessee has received Rs. 6,42,25,228/- as security deposit for creating rights in all their operations) therefore Rs. 6,42,25,228/- is a receipt in the nature of trade. However, no material has been brought on record by the AO to indicate that any purchase/sale of the impugned land has taken place. We further find that the AO has wrongly concluded that since M/s. Progressive is deriving income from allotment of plots and shops/stall which according to him also results in the....
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....come from business. A perusal of Section 28 and its application to the fact brings out very clearly that the assessee has not carried out any activity which tantamount to carrying out of business. Mere receipt of security deposit by the assessee cannot be said to be a profit arising out of an "adventure in the nature of trade" in the hands of the assessee. The AO. has tried to assess a receipt of security deposit as income arising out of an adventure in the nature of trade. However, to deem such a transaction to be an "adventure in the nature of trade", there should have been a purchase and sale of land. No material evidence is available on record to show that the assessee has sold any land during the year. The gain, if any would have arise....
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....ade. However, the AO has not only to establish that the transaction is an adventure but it has to go further and establish that it is in the nature of trade. In order to hold that an activity is in the nature of an adventure, there must be positive materials to prove that the assessee intended to trade in such an activity. Moreover, the expression "adventure in the nature of trade' appearing in the definition of 'business' postulates the existence of certain elements in the adventure which in law would invest it with the character of trade or business. In this regard, it is observed that the A.O. has erred in the present case in taxing the receipt of Security Deposit as an income in the realm of "Adventure in the nature of trade....