TaxTMI 
TaxTMI 
2016 (6) TMI 1308
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....the appeals, we heard both the appeals together and disposing of the same by this common order. 2. Sh. T. Banusekar, the Ld. representative for the assessee, submitted that the assessee entered into an agreement for development of land with M/s Delux Apartments & Building Company. As per this agreement, the assessee is entitled to retain 45% of undivided share of the land and 55% of undivided share in the land would go to M/s Deluxe Apartments & Building Company. The assessee, according to the Ld. representative, has not done anything other than providing the land for development. The entire business activity was done by M/s Deluxe Apartments & Building Company. After completion of the project, M/s Deluxe Apartments & Building Company ha....
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....e profit on sale of land, a Memorandum of Understanding was entered for development of land with M/s Deluxe Apartments & Building Company. The sale consideration in the form of 88,200 sq.ft. of constructed area, which is equal to 45% of constructed area, was given to the assesseefirm. What was received by the assessee-firm was treated as capital asset. Therefore, the assessee returned the profit on sale of the property as capital gain. However, the Assessing Officer has treated the same as business income of the assessee. 4. Referring to the order of the CIT(Appeals), the Ld. representative for the assessee submitted that the land in question was purchased as investment and the same was shown under the head "fixed asset" in the books and....
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....rtners Mrs. Saroj Agarwal, who is the owner of adjacent land which was also developed by the very same builder along with the assessee's land, the Ld. representative submitted that the Administrative Commissioner has directed the Assessing Officer to treat the gain on sale of the land as capital gain. In fact, Mrs. Saroj Agarwal claimed the profit as business income. However, the Administrative Commissioner directed the Assessing Officer to treat the same as capital gain and not as income from business. This order of the Administrative Commissioner attained finality. According to the Ld. representative, when the part of the land in the very same project was treated as capital asset, the balance land cannot be treated as stock-in-trade. A co....
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....vailable on record. The question arises consideration is whether the investment made by the assessee in the land at Nolambur is a stock-in-trade or capital asset? If the land is stock-in-trade, then naturally the profit on sale has to be considered as income from business. If it is considered as capital asset, then the profit has to be treated as capital gain. To ascertain whether the land in question is capital asset or stock-intrade, the intention of the assessee at the time of purchase of the property has to be ascertained. It is not in dispute that the assessee-partnership firm was formed on 05.04.2005 by means of partnership deed. However, the payment for purchase of land at Nolambur was made by M/s Petro Plast Industries Ltd. in Febru....
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....al asset by the partnership firm. 8. The next question arises for consideration is when the partnership firm itself was formed for purchase and sale of land, can the subject land be held as capital asset? This Tribunal is of the considered opinion that a company / partnership firm can have two portfolios, one is stock-in-trade and another is investment. Even a partnership firm, which is engaged in purchase and selling of land, can retain part of land as stock-in-trade and part of land as investment. When the intention of the assessee is to treat the land as investment, merely because the same was used for development by entering into a Memorandum of Understanding within a short span of time, that cannot be a reason to treat the subject l....
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....ered into. The Administrative Commissioner in the case of Mrs. Saroj Agarwal found that part of the land was capital asset. Accordingly, he directed the Assessing Officer to treat the gain as capital gain. This order of the Administrative Commissioner, passed under Section 263 of the Act attained finality. In this case also, even though the partnership firm was formed 05.04.2005 and the land was registered in the name of the firm on 23.05.2005, the assessee has not commenced any business activities; no other land appears to have been purchased; no supplementary work was carried on by the assessee-firm in the subject land; no organized effort was made other than simply entering into Memorandum of Understanding with the builder. As all risks ....