TaxTMI 
TaxTMI 
TaxTMI 
2018 (11) TMI 107
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....ion in all the four appeals is common, all the four appeals were heard together, and are disposed of by a common order. Facts, to the extent necessary, are that the assessee filed his return of wealth, for the assessment year 2009-2010, on 17.09.2010 declaring a net wealth of Rs. 1,86,620/-; a notice was issued to him thereafter, under Section 17 of the Wealth Tax Act, 1957, calling upon him to file his return of wealth for the assessment year 2009-2010; pursuant to the notice, the assessee filed a letter dated 04.04.2014 requesting that the return originally filed on 17.09.2010 be treated as a return in response to the notice under Section 17 of the Act; as the case was selected for scrutiny, a notice under Section 16(2) of the Act was issued; and after completing the assessment, the assessing officer determined the assesse's taxable wealth as Rs. 7,34,12,780/. Aggrieved thereby the assessee filed an appeal to the Commissioner of Wealth Tax who dismissed the appeal holding that the subject vacant land was liable to wealth tax, as it was not held by the assessee as stock-intrade. Before the Income Tax Appellate Tribunal it was contended, on behalf of the assessee, that, under Sec....
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....er purchase of subject land by the assessee on 30.07.2017, and his having entered into a development agreement the very next day i.e., 31.07.2007, would by itself show that the assessee intended to carry on an adventure in the nature of business, and as having treated the subject land as stock-in-trade, which would then require the subject land not to be treated as an "asset" under Section 2(ea)(v) of the Wealth Tax Act. Sri Challa Gunaranjan, Learned Counsel for the appellantassessee, would submit that the very fact that the appellant had entered into a joint development agreement with the developer on 31.07.2007, the very next day after he had purchased the said property on 30.07.2007, itself proved that the subject land was purchased by the assessee only with the intention of carrying on business; as it is clear that the assessee intended to carry on business, the mere fact that he had filed his income tax return in TR Form No.2 is of no consequence; because of the long drawn litigation between the appellants vendor and another, the subject property could not be developed during the assessment period; it is because it was not developed, during that period, that the petitioner d....
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....nt assets"; accepting the assesse's contention, that their having entered into a development agreement by itself reflected their intention to carry on business and to treat the subject land as stock-in-trade, would render Section 45 of the Income Tax Act redundant; if, as is now contended, the assessee always intended to use the subject land as stock-in-trade for the purpose of carrying on business, the return, which he should have filed is in ITR Form No.4; except for this selfserving statement that the subject land was intended to be used as stock-in-trade for the purpose of carrying on business, no evidence has been adduced by the assessee in support thereof, though the onus was on him to do so; the circumstances, necessary to establish the intention of the assessee to carry on business, must be discernible from the material on record; concurrent findings of fact recorded by three authorities (the assessing authority, the Commissioner of Wealth Tax (Appeals), and the Income Tax Appellate Tribunal), show that the asset was treated as a capital asset by the assessee, and not as stock-in-trade; and this submission, that the assessee intending to treat the subject land as stock-in-t....
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....the premise that the land would be given for development to them; it was their intention, after receipt of the developed property, to sell and realise the maximum benefit; immediately after purchase of the property, they had entered into a development agreement with M/s. Vulcon Project Developers Pvt. Ltd, and had filed a copy of the same before the assessing authority; they had kept this land as stock-in-trade in business, and were eligible for its benefit as such, upto a period of ten years from the date of purchase; and all the authorities had erred in treating this land as a capital asset falling within the ambit of Section 2(ea)(v) of the Act liable to tax under Section 3(2) thereof. The purchase of property by the appellants is an isolated transaction, and they have not carried on any business either before or thereafter. Granting that the appellants made a profitable bargain when they purchased the property, and granting further that the appellants had, when they purchased it, a desire to sell the property would not, without other circumstances, justify an inference that the appellants intended, by purchasing the property, to start a venture in the nature of business or tra....
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....e Section refers to an adventure in the nature of trade, it obviously refers to transactions which, individually, cannot themselves be described as trade or business but are essentially of such a similar character that they are treated as in the nature of trade. (G. Venkataswami Naidu &. Co. AIR 1959 SC 359). In Leeming v. Jones (1930) 15 T.C. 333 a syndicate was formed to acquire an option over a rubber estate with a view to resell it at a profit. On finding the estate too small, the syndicate acquired another estate and sold the two estates at a profit. It was held that the transaction was not in the nature of trade. The same view was expressed in Saroj Kumar Mazumdar AIR 1959 SC 1252 = (1959) 37 ITR 242 (SC), wherein the assessee, who carried on business in engineering works, purchased land which was under requisition by the Government, negotiated a sale before the land was de-requisitioned, and sold it after the land was released. In Commissioners of Inland Revenue v. Reinhold 34 Tax Cas 389 the respondent, who carried on business of warehousemen, bought four houses in January 1945, and sold them at a profit in December, 1947. He admitted that he had bought the property ....
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....cidental to it? An affirmative answer to this question, among others, may furnish relevant data for determining the character of the transaction. (G. Venkataswami Naidu & Co. AIR 1959 SC 359). Another test, sometimes applied in determining the character of the transaction, is whether the purchase was made with the intention to resell it at a profit ? It is often said that a transaction of purchase followed by resale can either be an investment or an adventure in the nature of trade. There is no middle course and no half-way house. This statement may be broadly true; and so some judicial decisions apply the test of the initial intention to resell in distinguishing adventures in the nature of trade from transactions of investment. Even in the application of this test, distinction will have to be made between initial intention to resell at a profit which is present but not dominant or sole; in other words, cases do often arise where the purchaser may be willing and may intend to sell the property purchased at a profit, but he would also intend and be willing to hold and enjoy it if a really high price is not offered. The intention to resell may in such cases be coupled with the intent....
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....the appellants-assessees had purchased the subject land on 30.07.2007, and had entered into a joint development agreement on the very next day i.e. on 31.07.2007, the question which necessitates examination is whether that, by itself, would reflect the appellants' intention to treat the land as stock-in-trade for the purpose of carrying on business, in which event alone would it not fall within the definition of "asset" under Section 2(ea)(v) of the Act; and would, consequently, not be included in his net wealth liable to tax under Section 3(2) of the Act. The Tribunal, and the authorities below, have relied on the fact that the appellants-assessees had filed their return, for the year ending 31.03.2008, in Form No.ITR-2; they had shown the asset as a fixed asset (immovable property) in their balance sheet for the year 31.03.2008 and 31.03.2009; and, except for their selfserving statement that the subject land was intended to be used as stock-in-trade for the purpose of carrying on business, no other evidence had been adduced by the assessees in support of such a claim, though the onus was on them to prove the same. In this context, it is useful to note that Rule 12 of the Income....
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....xecuted on 31.07.2007, no development has taken place on the subject land for the past more than a decade. Yet another factor which would belie the appellants-assessees' claim to have intended to use the subject land for the purpose of carrying on business, is that they had not, either before or after purchase of this land, carried on any business, much less in relation to land. In Chaturbhuj Dwarkadas Kapadia (2003) 260 ITR 491 (Bom), the Division bench of the Bombay High Court held that the agreement in question was a development agreement; such development agreements did not constitute transfer in general law; they are spread over a period of time; they contemplate various stages; the Bombay High Court, in various judgments, has taken the view in several matters that the object of entering into a development agreement is to enable a professional builder/contractor to make profits by completing the building and selling the flats at a profit; the aim of these professional contractors was only to make profits by completing the building and, therefore, no interest in the land was created in their favour under such agreements; such agreements were only a mode of remunerating the bui....